Hi all
Thought you might be interested in reading this article also published on the SPA May/June newsletter :
Sandra
QUOTE:
SPANISH LETTING TACTICS
WHAT TO DO WHEN INVESTING IN A SPANISH HOLIDAY LET PROPERTY
Joanna Styles, Retiring In Spain, Survival Books
5
If you buy a prospective holiday or retirement home in Spain but don’t want to live there yet, you could let it out (if it’s licensed)! There’s a
good market in some places although others such as the Costa del Sol are saturated…
1. Do some number-crunching on your property’s rental potential. If letting income is part of the buying equation, you need to start by
seeing how profitable it is likely to be. Rents vary hugely depending on the season, the region and the size and quality of a property. It’s
worth Googling and Yahooing to see what the going rate is for your type of property in your particular location. Most people who let yearround
have low, medium and high season rates. July and August and possibly the first two weeks of September are high season. Mid-season
usually comprises June, late September and October plus the Easter and Christmas/New Year periods. Mid season rates are normally 25%
less than high season rates. The rest of the year is low season and rates are typically 50% of the high season rates. Talk to letting agents
about expected occupancy; anything from 30% to 60% will be quoted; fellow property owners may give you some idea regarding likely
occupancy rates. What some owners do is to aim to rent fully during the high season, leaving other times for their own use.
2. Be aware of all of the likely costs. A holiday let in Spain is far removed from a BTL in Britain where you tend to have one long-term
tenant paying the same monthly rent and you can set this against your mortgage payments to see if it is basically profitable or not (above
125% and it probably is, much below 125% and it possibly isn’t). A Spanish holiday let has more ifs, buts and maybes, starting with patchy
letting revenues. Make sure you allow for the numerous costs and expenses that will reduce the profit. You need to furnish the property etc
to start with. Agents usually charge commission of 20% upwards. Other ongoing expenses include cleaning between and during lets; laundry
of household linen; garden and pool maintenance; maintenance of appliances; replacement of damaged and soiled items; insurance and
utility bills (electricity bills can be high if the property has air-conditioning or electric heating). Some property owners find that costs and
expenses account for as much as half of the rental income. And don’t forget your profits are subject to tax!
3. Choose an agent carefully. Probably the best advice that can be given here is to pick an agent by word-of-mouth recommendation. An
alternative is to Google and Yahoo for agents and then seek references (which you should take up) from satisfied clients. Note that the top
letting agents turn down many properties – either because these properties are not up-to-standard or are in an oversupply scenario. Do check
what else they are offering and make sure yours is comparable in standards. If you want your property to appear in an agent’s catalogue you
must usually contact them the summer before you want the property to first be let. Note that anyone can set up a holiday letting agency and
there are many cowboy operators. Always ask a management company to substantiate rental income claims and occupancy rates by showing
you examples of actual income received from other properties. Remember to ask for the names of satisfied clients and contact them. As a
rule of thumb, the longer the agency has been established, the better.
4. Know what to ask an agent. In addition to checking rental and occupancy claims, there are other questions to ask a letting agent. Ask
when the letting income is paid. By the by, make sure your income is kept in an escrow account or, even better, choose an agent with a
bonding scheme who pays you the rent before the arrival of guests. Some do. Also ask what additional charges are made and whether they
provide detailed accounts of income and expenses (ask to see a sample). If they don’t, look elsewhere. Ask how they market properties. The
larger companies market via newspapers, magazines, the internet, overseas agents and brochures and have representatives in various countries.
Others expect you to contribute towards marketing costs! Find out who they let to – what nationalities and whether they include families
with young children and singles. Some owners prefer not to let to young single groups. This may reduce your letting prospects in some
locations, although it may avoid the need to keep replacing damaged and soiled furnishings.
5. Decide exactly what it is you want to do. You may go for an out-and-out holiday letting investment. If so, you may struggle to cover
your outgoings, especially in oversaturated markets such as the Costal del Sol. You may be looking to buy to use yourself, eventually as a
retirement home, with lettings to contribute towards the costs. The top letting agencies, note, will sometimes not take on a property unless
they can let it at all times; some may not permit owners to use a property during the months of July and August! If you are going to let, fulltime
or part-time, you need to consider the costs, not least the set-up costs involved with furnishing and getting a property up to standard.
You will need to look at contracts as well; get professional advice. If you receive rent and accept a tenant without protest, you’re deemed
under Spanish law to have entered into a contractual relationship. You may wish to check whether a property is let when the agent tells you
it’s empty. Getting a phone installed and making friends with the neighbours are useful tips here!
IPA Recommended-Buy: Retiring In Spain by Joanna Styles is published by Survival Books. It is an excellent read for everyone who is
planning to buy in Spain. Go to
www.survivalbooks.net for this and other guides to Spain.
