Purchasing a property to let in Spain is a great investment – but it’s likely you want to know how much income to expect. Certainly, a buy to let rent calculator can be a useful tool, but be warned, they are easily manipulated. Although a buy to let rent calculator is useful to obtain a ballpark figure, to make a meaningful estimate you need to take into account several context specific factors. In this article, we discuss some of these points, specifically as they pertain to buying rental properties in Spain.
Why doing your own research is essential
When you’re looking for a property, the estate agent is likely to have an idea of how much rent you can charge. They’ll be able to provide you with information about the local rental market and trends in property prices. However, estate agents will have a vested interest in making the investment as attractive as possible. Therefore, keep their figures in mind but don’t use their calculation as your sole source of information. Instead, it is essential to do you own research about the local rental market.
A good starting point is to find out how much other local landlords are charging. Generally, you can obtain this information from other estate agents, local notice boards, and word of mouth. With this information, you can build a picture of the minimum and maximum you can expect to charge. However, these numbers will be different depending on whether you’re hoping to enter the holiday or long term let market. For example, long term tenants will not expect to pay the same premiums as holidaymakers.
Why a buy to let rent calculator can be unreliable
When calculating your budget, a buy to let rent calculator is unlikely to account for any context-specific additional costs. In order to get a realistic estimate of your potential profits, you need to have a clear understanding of what these costs are. For instance, you’ll need to have a comprehensive understanding of your mortgage offer, local taxes, and the tax you’ll need to pay on your rental income. To get this information, consult with a knowledgeable local solicitor; they’ll be able to provide you with estimates of IBI and taxes depending on your residency status/
Within your final calculation, it’s also prudent to include the ongoing costs of maintenance. For example, they’ll be items that you’ll need to replace or mend, especially if you are offering your property as a fully furnished holiday rental. Furthermore, holiday rentals come with other potentially unexpected costs; for example, you may need to employ someone as a key holder or property manager. You’ll also need to hire cleaning and laundry services, which can add up. Ignoring these costs will significantly skew the accuracy of your profit calculation, so it’s crucial to properly prepare.
Expenses you can claim against tax
However, on a positive note, many expenses associated with renting out a property can be claimed against tax. This will reduce the amount of tax you’ll have to pay, thus increasing profit. Tax deductible expenses include:
- Mortgage interest
- Local taxes and administrative charges
- Community of owners’ fees
- Home insurance premiums
- Property repairs
- Utility invoices (those not paid by the tenant)
- Gardening, alarm and security services
- Property management fees
- Lawyer’s fees for submitting the tax return
It is important to note that only fiscal residents of the European Economic Area (EEA) can deduct certain costs. To ensure your tax deductions are legal, you will need to check your calculations with a financial advisor. They can help you make sure that you keep the proper invoices to prove what has been spent and why.
Make sure your calculations are accurate
Buying to let in Spain is great investment. Whether your plan to let long term or rent out your property to holidaymakers, landlords in Spain can make a healthy profit. However, it is essential to be aware that individual circumstances will affect your budget. Although a generic buy to let rent calculator can be useful, exactly where you’re renting and to whom will make a big difference to your income. Therefore, it is essential to conduct your own research and seek the appropriate advice. Remember: it’s always sensible to underestimate profits to ensure your investment is sound.