What Should I Consider When Renting Out Property in Spain?
If you are new to the rental market and thinking of renting out your Spanish property, make sure that you have considered these points to have a smooth process and more importantly hassle-free!
A Valuable Tenant
A property owner, who later became a good friend, owned a duplex apartment in Calahonda, but as their family grew they decided to move into a townhouse in nearby Nueva Andalucia.
Back then, in 2007, the Spanish real estate market was just beginning to dip as a result of the financial crisis and their flat was proving difficult to sell.
Fortunately, a young English couple that they’d recently become acquainted with and who’d started a new kitchen fitting business agreed to ‘rent’ their flat.
Their verbal ‘contract’ agreed that in exchange for rent-free accommodation, the tenant would smarten up and decorate the entire 2 bedroom apartment to place and sell on the market six months later.
They had no written agreement and not even a deposit. All they had on this young couple was their gut instinct!
They did stick to their word, however, and they modernised the whole apartment and moved out on the agreed date.
Their very ‘handy’ tenants were the answer to their prayers during a slow housing market.
Our Friends Were Very Lucky With Their Tenants!!….
…..But We Certainly Don’t Recommend Their Way!!
Verbally agreeing a tenancy contract and without prior checks or the payment of a deposit is just asking for problems in Spain or anywhere!
In the case of our friends they were very fortunate that their judgement of character was correct but they admit that they were very naive back then!
Renting Out Property in Spain: Tips To Consider
For many, purchasing a second home not only serves as a getaway bolthole but also as a rentable asset.
Whether it is to cover the yearly IBI tax and monthly community fees or to increase the family income, renting out your property is a good option.
So before you rent out your Spanish property, consider the following valuable points.
1. Good Credit.
Select a tenant with good credit.
Make sure that any prospective tenant is responsible with paying the bills and that he or she hasn’t any previous incidences with late or non payments.
If the process is managed by a professional property agent they may ask the tenant to confirm their employment, length of time employed and monthly income.
Although long-winded, a proper referencing process helps find the right person to rent your property.
2. Adequate Deposit
Often we hear of occasions whereby a tenant has avoided paying the final month of the rental contract suggesting that the deposit money be used to cover the shortfall.
Due to this often occurring dilemma, the law currently allows the landlord to ask for 2 or 3 month deposit up front when signing the rental contract.
This not only covers possible damages to the property but also unfulfilled payments by the tenant.
3. Additional Guarantee
This additional guarantee is provided by someone who is prepared to pay should the tenant default on a payment.
As the title suggests, if under any circumstance the tenant is unable to pay the rent, the guarantor (obviously, one that does not have a poor credit history), can step in and make the payment on the tenant’s behalf.
There can be two types of guarantees:
- Personal guarantee: A family member or a close friend. Stipulations being that they have good credit score and/or full-time employment.
- Bank guarantee: A bank or other professional and financial institution. This can be quite a lengthy and complicated process as the company will make very thorough checks. Typically, they will contact the tenant’s employer, check their credit rating, bank details, contact previous landlords etc. and might ask for them to deposit a certain amount in the bank. And depending on the profile of the tenant, the bank may after all, only offer a guarantee over a certain length of time, perhaps 6 months to one year.
However, the cost and difficulty involved in getting this type of guarantees might put tenants off renting your property.
To avoid going to court over a dispute between landlord and tenant which is not only stressful but very costly, an arbitrator can be an alternative solution.
A flexible method of resolving a dispute between both parties outside of the judicial system is worth considering when taking on a new tenant. A signed contract by all parties agrees that in the event of a conflict, the decision is submitted to an impartial arbitrator in order to solve it.
Taking up an insurance that covers payment defaults and damages caused by the tenants is a good alternative to the traditional guarantees. This way you don’t have to ask for a additional deposit/guarantee which might be quite difficult for some to provide.
Insurance companies offer different types of insurance with different coverage such as: payment defaults, damages in the property, legal expenses, etc. The cost of such an insurance will depend on the policy and what it covers, and it can be paid by either the landlord or the tenants.
It Helps To Look After Your Tenant
Given that some apartments and villas on the Costa del Sol can command a rental yield of 4.5-5.5%, the private rental sector within the foreign community is certainly growing in Spain.
Although the search for the perfect tenant isn’t always straightforward, we at TerraSur Homes strongly suggest that a property owner should seek the services of a professional company like ourselves. This will ensure that the procedures are adhered to with regards to the screening of potential tenants.
We also suggest that once you have acquired a good tenant, look after them! Particularly with long-term tenants, freshen up the paintwork and answer any concerns promptly. If they’re happy clients, they’ll stay!
If it’s short-term rental that you are offering, then be sure that changeover days are smooth and efficient, without delays.
At the end of the day, if you are thinking of renting out your Spanish property here on the Costa del Sol, avoid the headaches and allow TerraSur Homes to rent out and manage your Spanish property. Click here to contact us for a no obligation quote.