In this post we tell you some of the advantages of renting your home, we hope to solve all the doubts you have as owners, some of the advantages of renting your home are:
✓ The possibility of a return on investment.
✓ It helps to pay the mortgage (if any) and to amortize fixed costs such as IBI, community or maintenance of supplies.
The fear that the tenant does not comply with the payments of the rent of the rent and commits vandalism acts in the property can be remedied since a filter and selection of the tenants must be carried out. However, if you wish, you can hire our integral rental property management service that will guarantee the payment of the rent of your tenant and the maintenance of the property.
We know the importance of renting a property quickly and with guarantees. How much should be asked for the deposit, for how long to rent, is it better to receive the advice of a real estate agency specialized in rental properties? The answers to these and many other questions are an important part to take into account before renting the property. Renting quickly will help us to maintain a good profitability of our property, but it is even more important that we have good guarantees from our tenant, otherwise we will see our profitability diminished.
What is a long term rental?
Unlike vacation or short term rentals, long term rentals are those that include periods of at least six months. In general, long term rentals pay the owner the rent on a monthly basis, and are responsible for expenses derived from the rental of consumption such as gas or electricity bills (expenses that are susceptible to individualization, by means of a meter). Although in a certain way, and according to the law
The usual economic demands that we find on the part of the owner when making a long term rental of a property, include asking for a month's deposit (as required by law) and the current month or in progress. However, in many occasions additional guarantees are requested to the tenant, that guarantee the fulfillment of all the obligations in which the signature of the lease contract derives. The most common at the time of signing a rental contract for a habitual residence, in terms of the duration of the contract, is to sign a contract for a renewable period of one year, and the law requires that if the owner is an individual, the contract be extended up to five years, or up to 7 years if the owner is a legal entity (this applies to contracts signed as of March 6, 2019).
What are the advantages of a long term rental?
We are going to tell you some of the pros of long term rentals, as opposed to long term rentals (vacation rentals):
1- . Reliability in the payment. When carrying out a good study of the possible interested ones in renting us the housing, we have the possibility of selecting a tenant who can project a tranquility to us at the time of the collection of the rent avoiding us worries. Although the stays or overnight stays in the vacation rental are charged in full as a general rule before handing over the keys to the guest, (which is a peace of mind). Even with certain advantages the short stay rental makes that we can not guarantee an average annual profitability before allocating our home to this type of rental, because the situation is changing, the habits of tourists are also, and the epidemic of COVID, has made us see that tourism can suffer when we have better tourism numbers (such as 2019) year in which Spain broke records and was visited by 83.51 million tourists.
2-. Maintenance of the property. As there is a deposit, an inventory signed and attached to the lease, and being the usual residence of our tenant, the tenant is more obliged to take care of the property and we avoid situations of damage as can happen in a vacation rental property. Since in a vacation rental the guests can be more careless when visiting our property only for a few days. So we can say as a general rule that the wear and tear will be less with only one tenant.
3-. No tourist taxes are paid. In some autonomous regions and cities in Spain there is a tourist tax or eco-tax. Normally it is applied per person and day, being applied to the price of the stays in the tourist establishments -hotels, tourist apartments, campings, rural lodging, youth hostels, housings of tourist use, areas of overnight stay destined to mobile hostels and boats of tourist cruise. The public bodies (town halls,...) are responsible for collecting them and establishing the form and amount according to the category or type of accommodation.
4-. Occupancy rate.having a long term tenant there is no need to worry about the occupancy rate, and we can also count on a company to manage and administer the rental of our home, taking care of solving any problems or breakdowns that arise in the property with the tenant, being able to forget about it completely.
5. Community of Owners. This type of rental avoids the problems with the neighbors that usually generate the rental of houses for tourist use. Thus improving the neighborly coexistence in the Communities of Owners.
6. Increase of the profitability. Although it may give the impression that by allocating our home to tourist rental we can obtain more benefits, the reality is that since there is a reduction of 60% of the net yield for renting a regular home and not the occasional one, in most cases the regular rental is more profitable than the vacation rental when declaring this income.
We must take into account that with the new law against Tax Fraud published in the BOE last Saturday, July 10, 2021, the 60% reduction is eliminated when the taxpayer has not declared all the income obtained, or has incorrectly deducted the expenses attributable to the lease.
What expenses can I charge to my leased property?
In this section we are going to detail, albeit in a summarized manner, the expenses that an owner may charge to his rented property:
l. Imputation of repair expenses. The expenses of all the repairs that have had to be made in the house can be imputed at the time of making the income tax return.
II. Amortization of the house. During 33 years, 3% of the expenses incurred to buy the house can be imputed.
II. Amortization of furniture. During 10 years 10% of the expenses of the furniture bought to furnish the house dedicated to the rent as habitual residence can be imputed.
IV. Predictable income and expenses. In long-term leases, income and expenses are much more predictable than in properties intended for tourist use.
In general, in addition to the tax benefits, maintaining a recurring income that is fixed and simple tends to be more attractive to owners in the medium and long term.
What to consider about vacation rentals vs. long term rentals?
When renting a furnished apartment for a long term, it is important to take into account several recommendations:
l. Equipping the vacation rental for daily living. Tenants who rent a property as a long-term rental do not have the same needs as guests who rent for a shorter period of time. For a tenant, the property will become his home, so it will have to meet his expectations to make him feel that it is his home for as long as possible. However, for guests it is important that the property has a well prepared kitchen (with cooking utensils), a good number of utensils, high speed Internet with Wifi, appliances and mini-appliances, necessary furniture, and welcome or courtesy details (even if optional) will help us to have and maintain a ratio of very favorable opinions about our property.
As a landlord you should never forget if you rent a fully furnished apartment, or even if it is only partly furnished, to make an inventory of the furniture and belongings that you leave in the apartment, only in this way in case of any inconvenience that occurs after the signing of the contract you can claim and require the tenant to replace and deliver the apartment in the same condition in which it was received. It is obvious, that after the passage of time leased, part of the furniture has a normal wear and tear of use and the passage of time. And such wear and tear does not derive from a bad practice or treatment of your tenant.
2. Know the tenant well. It is possible that, as a landlord, you may have some mistrust to rent the property for a long period of time. But we will always have the option to ask for an economic reservation prior to the signing of the contract with some anticipation, being able to make an investigation and to know more thoroughly the future tenant in order to see if he is suitable to live in our house. A real estate agency will make a filter of tenants, and will check the economic solvency of our future tenant, guaranteeing us tranquility in the collection of our rent.
3. Regularity. One of the biggest advantages of renting our house for long term is to know that every month we will be able to count on a fixed income. Even if the income were lower, it is possible that the benefits in the long term will be greater. This can alleviate the concern of those owners who have many other expenses to deal with. In addition, tenants of this type of rental usually pay their monthly payments religiously and take care of all the bills (electricity, water, gas, internet...).
4. Deductions. With respect to tax deductions and management fees, long term rentals benefit from them. Taxes are paid annually in the income tax return. This type of rental benefits from the deduction of expenses derived from the rental activity: electricity, IBI, repairs and conservation, among others."
5. Less things to take care of. When renting a property for long stays, there are fewer things to worry about when it comes to administrative tasks such as paperwork, handing over the keys and even advertising - promoting the property. Once the tenant signs the contract, you will know how long he/she will be staying in the property.
6. Unfurnished rental. We have the option of looking for a tenant who requires unfurnished housing, although for some landlords it is ideal since they assure that they tend to be more durable tenants, and in turn the landlord exposes less or no furniture so that the expenses derived from the lease are lower.
As we can observe each property is a world, and we should as owners analyze in an objective way which exit is the most viable for our property. We can establish a normal and it is that: the more objective we are, the more profitability we can obtain in our property. Sometimes, we should let ourselves be advised by an expert, who knows the area and has experience. The commissions in a long term rental, or percentages applied by vacation rental management companies can be positive to pay them, taking into account that we are supported by professionals. And let's keep in mind that these expenses will be subtracted to the net yields obtained from our property, in our income tax return (IRPF).
Mr. owner, keep in mind that not every property is suitable for vacation rental, because some houses or apartments may be rented for days, weeks or fortnights very well in summer, but during the year it is an effort without results if we prolong this type of rental. And not every property that we want to rent for long term will attract an official, we have in mind that there are very good tenants.
If you are an owner and you want to put your apartment or house for rent, we make the inventory, we take care of the publication and promotion of your property, we select the candidates based on a study of economic solvency to the documentation provided and we write the contract according to the updated law, and the needs of both parties,
We have a digital process in all types of documents, if necessary. We take care of the delivery of keys, change of ownership of supplies (electricity, water and gas), and the collection and payment of rent. We will guarantee the collection of the rent in case of non-payment of the rent and we will paint the apartment free of charge when the tenant leaves, if the tenant stays for five years in the property and it was rented by our real estate agency.