Buying and renting your first flat in Spain: our advice

Buying a new or old flat in Spain to rent out can be a profitable long-term investment. Spain's property market is one of the most affordable in Europe in terms of price. Rental yields are attractive, with an estimated average of 6.1% in 2022 (1). Rental demand is constantly on the rise in several regions and towns. However, you need to be careful and vigilant if you are to make a successful investment in rental property. Here are our 5 tips to guide you in your choices and help you realise your project.

Be aware of the rules for buying and renting property in Spain

The Spanish property market is constantly evolving. It attracts a large number of foreign investors looking to make good deals by buying profitable properties to let. If you too are interested in investing in this sector to increase your wealth or supplement your retirement income, you need to have a good understanding of the Spanish rental property market before you take the plunge.

For example, you need to obtain a foreign nationals' identification number (NIE) to be able to buy a new or old flat in Spain. This number is essential for signing the deed of sale for the property. Opening a Spanish bank account is also recommended. A Spanish bank account makes it easier to buy a property and pay the associated taxes. To open one, you will also need a NIE.

There are other requirements for foreigners wishing to buy a flat or house that you should be aware of. You should also be aware of the regulations governing rental property in Spain. A number of points have recently been amended in Spanish tenancy law:

• the duration of leases
• the price of the rent
• the monthly payment period
• deposits.

To avoid any pitfalls or surprises, make sure you are familiar with the rules governing rental investment and flat rental in Spain.

Select a highly profitable area for rental investment

Location is the key to a successful rental property investment. The flat must be well located to attract potential tenants and generate income. So take your time analysing Spain's various autonomous communities. Select the areas that have strong rental demand and offer good potential for increasing property value. Take into account selection criteria such as :

demographic growth in the area
accessibility to public transport
the number of local shops
the presence of tourist attractions and parks
the cost of living,
the location of schools, colleges or universities...

Buying a 4-room flat, for example, will be worthwhile in a town with good public transport links and where there are local shops, a school and a college or university. This type of accommodation is ideal for families with children to send to school.

Coastal areas such as the Costa Brava or the Costa Blanca are perfect for buying a flat to rent as a furnished residence to tourists or foreigners. Towns such as Rosas, Cadaqués, Empuriabrava, Lloret de Mar, La Escala and Platja de Aro are experiencing strong rental demand, especially in summer.

Study the rental property market in your chosen area

Whatever area or town you choose, take the time to analyse the characteristics of the rental property market. For example, find out what the average price of a flat is by looking at property advertisements on specialist websites such as Immo 365. You can also find out about the profitability of a rental investment and the rental rate in the region. Having a precise idea of the rent you can charge will also help you avoid the risk of vacancies and determine the return on your investment.

Above all, be aware of local regulations on renting flats in Spain. Some autonomous communities have restrictions on short-term tourist lets, for example. So make sure you know all the aspects of the law in force regarding rental investment and renting in your chosen area. Buying a property or living in Spain has its advantages and disadvantages, which you should also be aware of, particularly the advantages and disadvantages of investing in your chosen city.

Draw up a realistic budget for buying a flat in Spain

A crucial stage in your project to buy an old or new flat to rent out is defining your budget. To do this, take into account not only the price of the property, but also the taxes and charges associated with the transaction. A property costs an average of €1,960 per square metre (2) in Spain. More specifically, the price of a flat varies between €50,000 and €1,500,000 (3), depending on its size and location or town. A deposit of around 20% of the total price must be paid before you buy.

For an old flat, you need to budget for the amount of property transfer tax (ITP). The rate of ITP varies between 5% and 11% of the sale price of the property, depending on the region and the law in force there. If you are investing in a new-build flat, you will need to add the amount of VAT to the purchase price of the property.

Notary fees and the services of a lawyer are also additional charges. There are also estate agency fees in Spain to factor into the budget, such as the commission on the sale and the fees for property management services. And don't forget any expenses relating to refurbishment work in the case of an old flat, and community fees. A word of advice: make sure that your rental income covers your monthly costs, including the mortgage or loan (if you have taken out one).

Get help from experts in the Spanish property market

To give yourself the best chance of making a success of your rental investment project, enlist the services of experts in the Spanish property sector. Favour those who are multilingual to ensure smooth and easy communication. For example, talking to an Immo 365 expert about renting out your first flat in Spain can give you a thorough understanding of the local property market. This way, you can make your property investment under the best possible conditions. You'll need the help of a local estate agent throughout the buying process.

You'll also need legal and tax advice and support. Look for an experienced notary, lawyer and/or expert in Spanish property law. They can help you to

• understand Spanish property law,
• translate the documents needed for the transaction
• take out home insurance,
• obtain an NIE,
• find out about Spanish property tax, etc.

Above all, you need the help of an experienced lawyer to draw up a sound tenancy agreement that protects your interests as a landlord. If you don't live in Spain, or if you prefer to delegate property management tasks, you should use a reliable property management company. Whether you're looking to manage a long-term, seasonal or holiday rental, choose an estate agency with many years' experience like Immo365. Our agency will help you avoid the risks of late rent, unpaid rent or tenants who do not respect the contract. Entrust us with the management of your property on the Costa Brava for rent.