The second residence on the Costa Blanca has become fashionable again in recent years, although far away were the times when in the middle of the real estate bubble some ventured to pay the entrance of several properties at once.
New investors have learned from mistakes made during the crisis and market logic and strategy are now enforced before making any trades. In addition, there are several indicators that can give you the guideline on when and how to invest in properties. We can distinguish mainly between two types of actors in this model of buying properties for rent, both tourist and residential. On the one hand, the Recent Negative Rate Policy put forward by the European Central Bank has caused funds and large firms to put the spotlight on the housing market.
On the other hand, it is in the business of tourist flats any citizen who has seen the rise in rental prices, especially on the coast and in large capitals, and plans to buy to live, or to exploit the property in short or long rents and Stancia. But we wonder, is this profitable?
Below we want to share with you some keys to study the profitability that offers buying a home and then rent it.
According to the latest study of a well-known real estate portal, the gross rental return in Spain was 5.15% in the third quarter of the year. This is the average annual benefit that a homeowner currently gets by putting it up for rent after purchase. By putting figures and numbers to this data, we can establish that the average purchase price of a residence in Spain during the third quarter was 213,696 euros (126 m2 at 1,696 euros/m2). On the other hand, the average monthly national income was 982 euros. Therefore, the owner obtained a total of 11,784 gross euros per year. This data yields a gross return for this asset of 5.51%.
This is a revealing number, since according to the same source, rental profitability is a good indicator to evaluate the health of the sector and make a forecast of what is to come in the short and medium term. If we compare this figure (5.51%) with the same period of the previous year, the gross average return on the rental of a residence in Spain was fixed at 5.42%, nine hundredths less.
As far as regions are concerned, the Valencian Community tops the list of most profitable communities along with Aragon, Castilla La-Mancha, Murcia and Navarra.
In addition, because of its location, the Costa Blanca is one of the areas where you choose the most tourist rental in front of the residential rental, next to the Balearic Islands, Costa del Sol and the Canary Islands.
Advantages of each type of rental
The advantages derived from this type of rental compared to the long stay are:
- Enjoy our home intermittently, having more periods of time available for our use.
- Higher benefit, having the possibility of receiving higher income for each overnight stay.
- Lower risk of delinquency, when receiving payment generally in advance.
- Lower risk of housing occupancy.
On the other hand, long-term rental provides a number of benefits:
- Tax advantages impacted on the deduction of the IRPF
- Convenience of being able to rent the property without making changes of guests on a regular basis as in the previous scenario
- Peace of mind receiving rent without worrying about low-occupancy times
- Fixed income
What is the best way to invest?
The current situation of interest rates at historical lows raised by the ECB invites borrowing to buy. If it’s a long-term investment, you’d better do it with a fixed-rate mortgage and be clear about fixed costs. Banks are stricter in concessions, but if solvency requirements are met some entities are offering up to 75% of the purchase or appraisal value of the property.
Before carrying out any operation and if you do not have the proper knowledge about the real estate market in which we are going to invest it is highly advisable to contact specialists who can advise you to avoid unpleasant surprises. At Villas Internacional we have extensive experience in this field, and we can help you make the right decisions. In addition, we help you throughout the process of buying your second residence on the Costa Blanca, whether it is a villa, a luxury villa, a flat or a plot. Once purchased, you will only have to decide whether to offer it for holiday rental or long stay for maximum profitability.