Having a second residence in Spain is quite common, proof of this is that there are more than 3,5 million families who have a second home either on the beach, in the mountains, in the countryside or in the town. Generally these properties are being used by their owners or relatives for their personal enjoyment during vacation periods or weekends. But currently, approximately 35% of these residences have their owners decided to make them profitable so that it generates recurring passive income, and is not fixed expenses for the simple fact of owning a home.
This growing trend implies a paradigm shift, which consists of going from having the cost of a second home, to having additional income and focusing it as an investment. This occurs mainly thanks to the emergence of technology, which offers many alternatives to, in a simple, fast and direct way, offer our home to other users to make it profitable.
How can we make it profitable?
We have 2 alternatives: el long-term rental or vacation rental.
- Long Term Rental: It is about allocating our home so that a family resides in it all year round permanently and pays us a monthly rent for its use. This is the classic example of a recurring Passive Income:
A contract is signed between the Tenant and the owner, generally with a minimum duration of 1 year, although it must be borne in mind that the latest amendment to the Urban Leasing Law establishes that the minimum duration of lease contracts intended for habitual residence It is 5 years (with some exceptions).
Using your second residence for a long-term rental has the disadvantage: You will not be able to use it during vacation periods or on weekends, but instead you will get a monthly income, which will be a joy for your pocket.
This type of rental has a advantage Very important from a tax point of view, because there is a 60% reduction for owners, that is, of every € 100 that is entered through the lease, they are only subject to taxation or taxes on € 40 are paid.
Other advantages are that, with the exception of IBI, all other housing expenses such as electricity, water, community are paid by the tenant, so that some fixed expenses that the owner assumes if he has the empty house would no longer have to pay them.
- Vacation or Short Term Rental: If your home is located in a tourist area and you have also carefully cared for it to make it beautiful and attractive, renting for tourist purposes is your most profitable option. Unlike the previous one, this option allows you to choose the periods that you put it up for rent, so it offers greater flexibility by being able to make personal use compatible with the possibility of making the home profitable.
The profitability in some cases may be higher than the long-term rental, but the work and costs of managing it are also higher, so it is advisable to take a pencil and paper and make accounts of the 2 options.
If the second residence is close to your habitual residence, you can carry out the management yourself by hanging the property on platforms such as Airbnb or Booking and then personally manage the entries and exits.
On the other hand, if doing it yourself is not what you are looking for, there are a large number of specialized companies that can take care of the entire process without having to do any work.
Which option is more profitable?
This is the big question and the answer is "it depends", it depends on many factors such as: the condition of the house, the location, the fixed and variable costs, etc. At an orientation level, for a Long-Term rental, a profitability of 6% per year is interesting, that is, from the income you enter during a year you calculate what% it supposes on the purchase value of this.
On the other hand, in the tourist rental, if you subtract all the expenses from the income obtained and value the work of managing it (if you do it yourself) and if the profitability is higher than the Long-Term rental, go ahead.
As we have said before, Long Term rental is incentivized from a tax point of view with reductions of 60%, but on the other hand, Vacation Rentals do not have these incentives.
Finally, if you are thinking of acquiring a second residence (not only by renting you obtain profitability), it is also profitable with the future sale of the property, that is why it is very important to study in detail the home, location and all the factors that may make it revalue in the future.
En Dream Sun Spain We have a team of Architects, Economists and experts in the real estate market that can help you in the investment decision in a second residence.
