In this post, we will tell you some of the advantages of renting your property, and we hope to resolve all the doubts you may have as owners. Some of the advantages of renting your property are:
✓ The possibility of making the investment profitable
✓ Helps with mortgage payments (if any) and amortizing fixed costs such as IBI, community fees, or supply maintenance.
The fear that the tenant will not meet the payments of the rental income and commits vandalism in the property can be remedied as a filter and selection of tenants must be carried out. However, if you wish, you can hire our service comprehensive rental property management that will guarantee the payment of your tenant's rent 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 advice from a real estate agency specialized in rental properties? The answers to these and many other questions are important to consider before renting the property. Renting quickly will help us maintain a good profitability of our property, but it is even more important that we have good guarantees from our tenant, as otherwise, we will see our profitability diminished.
What is a long-term rental?
Unlike vacation or short-stay rentals, long-term rentals are those that include periods of at least six months. In general, properties rented for long terms pay the owner the rent on a monthly basis and take care of consumption-related rental expenses such as gas or electricity bills. (Expenses that can be individualized through a meter.). Although in a way, and according to the law
The usual economic requirements that we encounter from the owner when making a long-term rental of a property include asking for one month of deposit (as stipulated by law) and the current month. However, in many cases, additional guarantees are requested from the tenant to ensure compliance with all obligations arising from the signing of the lease contract. The most common when signing a lease for a habitual residence, regarding the duration of the contract, is to make a one-year renewable contract, requiring the law that if the owner is a natural person, they must extend the contract for up to five years, or up to 7 years if the owner is a legal entity (this applies to contracts signed from March 6, 2019).
What advantages does a long-term rental have?
We are going to tell you some of the pros of long-term rental, against long-stay rental (Vacation rental):
1- . Payment reliability. By conducting a good study of potential tenants interested in renting our property, we have the opportunity to select a tenant who can provide us with peace of mind when it comes to collecting rent, avoiding worries. While stays or overnight accommodations in vacation rentals are generally charged in full before handing over the keys to the guest (which is reassuring). Even with certain advantages, short-term rentals do not guarantee an average annual return before dedicating our property to this type of rental, as the situation is changing, tourist habits are also changing, and the COVID epidemic has shown us that tourism can be affected even when we have the best tourist numbers (like in 2019), the year Spain set a record with 83.51 million tourists.
2-. Maintenance of the home. With a deposit in place, having a signed inventory attached to the lease agreement, and being the habitual residence of our tenant, they are more obligated to take care of the property and we avoid damage situations that can occur in a vacation rental. Since in a vacation rental, guests may be more careless when visiting our property for just a few days. Therefore, we can generally affirm that wear and tear will be less with a single tenant.
3-. No tourist taxes. In some autonomous communities and cities in Spain, there is a tourist tax or eco-tax. It is usually applied per person per day, added to the price of stays in establishments. tourist –hotels, apartments tourist, campsites, rural accommodation, youth hostels, residential properties tourist, overnight areas intended for mobile shelters and cruise boats tourist. 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. With a long-term tenant, there is no need to worry about the occupancy rate, and we can also rely on a company to manage and administer the rental of our property, taking care of any problems or repairs that arise in the property with the tenant, allowing us to completely relax.
5. Community of Owners. In this type of rental, problems with neighbors that usually arise from renting tourist-use homes are avoided. Thus improving neighborhood coexistence in the Communities of Owners.
6. Increase in profitability. Although it may seem that dedicating our property to tourist rental can yield more benefits, the reality is that the existence of a 60% reduction in net income from renting a habitual residence and not in the occasional makes it more profitable in most cases to rent habitually over vacation rentals when declaring those incomes.
We must take into account that with the new law against tax fraud published in the BOE on 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 rental.
What expenses can I attribute to my rented property?
In this section, we will detail, albeit briefly, the expenses that an owner can allocate to their rented property:
l. Allocation of repair expenses. The costs of all repairs that have had to be made in the property can be allocated when filing the income tax return.
II. Amortization of the property. Over 33 years, 3% of the expenses incurred to purchase the property can be deducted.
lII. Amortization of furniture. For 10 years, 10% of the expenses of the furniture purchased to furnish the house dedicated to rental as a habitual residence can be allocated.
IV. Predictable income and expenses. In long-term leases, expenses and income are much more predictable than in properties intended for tourist use.
In general, in addition to tax benefits, maintaining recurring income that is fixed and simple tends to attract more owners in the medium and long term.
What should be considered about vacation rentals versus long-term rentals?
When renting a furnished home for a long term, it is important to consider several recommendations:
l. Equip the vacation rental for daily life. Tenants who rent a property as a long-term rental do not have the same needs as guests who do so for a shorter time. For a tenant, the property will become their home, so it must meet their expectations so that they feel it is their home for as long as possible. However, for guests, it is important that the property has a well-equipped kitchen (with cooking utensils), a good number of items, high-speed Internet with Wifi, appliances and mini-appliances, necessary furniture, and welcome or courtesy details (even if optional) will help us maintain a very favorable review ratio for our property.
As an owner, you should never forget that if you rent a fully furnished apartment, or even if it is only partially furnished, to make an inventory of the furniture and items you leave in the property. Only in this way, in case of any inconvenience that arises after signing the contract, you can claim and demand that the tenant restore and return the property in the same condition in which they received it. It is obvious that over time, part of the furniture may show normal wear and tear due to use and the passage of time. And such wear does not result from any bad practice or treatment by your tenant.
2. Know your tenant well. As an owner, you may have some distrust about renting the property for an extended period. But we will always have the option to request an economic reservation prior to signing the contract with some advance notice, allowing us to conduct research and get to know the future tenant more thoroughly to see if they are suitable to live in our property. A real estate agency will filter tenants for us and check the economic solvency of our future tenant, guaranteeing us peace of mind in collecting our rent.
3. Regularity. One of the greatest advantages of renting our property for a long term is knowing that each month there will be a fixed income. Although the income may be lower, it is possible that the long-term benefits are greater. This can alleviate the concern of those owners who have many other expenses to face. Additionally, 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. Regarding tax reductions and management expenses, long-term rentals benefit. 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 maintenance, among others.
5. Fewer things to worry about. When renting a property for long stays, there are fewer things to worry about regarding administrative tasks such as paperwork, key handover, and even advertising - promoting the property. Once the tenant signs the contract, it will be known how long they will stay in the property.
6. Unfurnished rental. We have the option to look for a tenant who requires an unfurnished property, which is ideal for some owners as they ensure that they tend to be more durable tenants, and at the same time, the owner exposes less or no furniture, so the expenses derived from the rental are lower.
As we can see, each property is a world, and we as owners should objectively analyze what the most viable exit is for our property. We can establish a norm that: the more objective we are, the more profitability we can obtain from our home. Sometimes, we must let ourselves be advised by an expert who knows the area and has experience. Commissions in a long-term rental, or percentages applied by vacation rental management companies can be worth paying, considering that we are backed by professionals. And keep in mind that these expenses will be deducted from the net income obtained from our property in our income tax return (IRPF).
Dear owner, please keep in mind that not every property is suitable for vacation rental, as some homes or apartments may rent well by the day, week, or fortnight in the summer, but during the year it may be an effort without results if we extend this type of rental. And not every property we want to allocate for long-term rental will attract a civil servant; we must keep in mind that there are very good tenants.
If you are an owner and want to rent your apartment or house, we will make the inventory, we take care of the publication and promotion of your property, we select candidates based on an economic solvency study of the documentation provided, and we draft the contract according to current law and the needs of both parties,
We have a digital process for all types of documents, if necessary. We take care of key delivery, change of ownership of supplies (electricity, water, and gas), and the collection and payment of rent. We will guarantee the collection of rent in the event of a possible default on the rent, and we will paint the apartment for free when the tenant leaves, if they have stayed for five years in the property and it was rented through our real estate agency.
