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PROPERTY

How to make money from your Spanish property during low season

If you are a non-resident and own a property in Spain or you only live here for part of the year, here’s how you can make money from your Spanish home during the colder months of the year.

How to make money from your Spanish property during low season
How to make money from your Spanish property in low season. Natalie White / Pixabay

With the rise in inflation, interest rates going up and the general cost of living increasing, people are looking for more ways they can make money. 

If you’re lucky enough to have a second home in Spain, there are ways you can make some extra cash from it, other than simply renting it out full-time.

Winter is traditionally low season in Spain because most travellers want to come during school holidays or the warmer times of year to enjoy the country’s enviable beaches. 

However, this doesn’t mean that you can’t rent out your property in winter and still make a profit from it. 

Property giant Idealista suggests that renting out your property short to medium term, even in the low season, can be beneficial and that it’s better than leaving it empty until you’re ready to use it in the summer. 

The company says there are three main reasons why you should consider it:

  • It’s easy to find tenants – Even during the low season, it’s easy to find short-term tenants to rent out your property. It goes without saying that the big cities such as Madrid and Barcelona are still popular winter destinations, but even if you’re property is near coastal resorts, there may be people trying to escape the winter in northern Europe, trying to avoid heating bills back home or even remote workers or digital nomads. 
  • It protects your property against squattersSquatters can be a problem in Spain, mainly because it’s so difficult to legally get them out once they have settled or managed to gain access and changed the locks. Your property may be at risk if it’s left empty during winter, but if you rent it out and you have tenants it’s unlikely squatters will try to move in. 
  • You can return to your property whenever you want to use it – Another reason why short-to-mid-term rentals are ideal for those with second homes is that you’re not locked into a long-term contract, so you can return to your property and use it whenever you want to. 

In this way, you can get the money you need to meet other expenses, as well as continue to use your property as a second or holiday home. 

Be aware, if you plan on doing this, you may need a tourist licence for it to be legal. According to law firm Advisors Costa Blanca, a tourist licence is compulsory in almost all Spanish regions for tourists or for short terms rentals, which is considered less than 3 months. 

READ ALSO – EXPLAINED: What are Spain’s rules and taxes for Airbnb rentals?

The best way of obtaining a tourist licence is to contact your Ayuntamiento or Town Hall, but it’s important to note that not everywhere will issue you with a tourist licence. For example, in Barcelona, the council no longer issues these licences. 

If you’re unable to get a tourist licence, to be on the safe side, you can rent your property out for three months or more, still without having to sign up to rent it out for a full year. People like remote workers would be good to target for these types of rentals and are often in high demand because they’re difficult to find. 

Keep in mind though that there are also a couple of disadvantages to renting out your second home short term. 

  • Problematic tenants – Unfortunately there can be some problems with certain tenants such as those who don’t pay their rent on time or those who are noisy and create issues for the neighbours. Getting an agency to help manage the rental or vetting your potential tenants can help to avoid these issues. 

  • Damages or repairs – There is always some wear and tear when you rent out a property for any length of time, so you must be prepared to do some light repairs or repainting after they move out. Of course, there is always the worry that they will cause more damage, so make sure you have the appropriate home insurance and ask for a deposit in advance. 

It’s important to remember your tax obligations should you rent out your second home, even if you’re a non-resident so it’s best to contact a gestor to help you navigate the system and help you figure out what you have to pay. 

This IRNR (Non-resident Income Tax) is 19 percent on net income for EU residents and 24 percent for non-EU residents.

Crucially, however, foreign non-resident homeowners from the EU, Norway and Iceland can claim back many more expenses (mortgage interest, insurance, IBI, community fees etc) which non-EU resident property owners cannot.

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TAXES

Spain’s deputy PM proposes freezing mortgage rates

Yolanda Díaz, Spain's Deputy Prime Minister and Labour Minister, has called for a freeze on variable mortgage rates amid news that Spain's biggest banks have enjoyed a bumper year of record profits.

Spain's deputy PM proposes freezing mortgage rates

Yolanda Díaz, Spain’s Labour Minister and the ideological force behind sweeping labour market reforms, has called for a freeze on variable rate mortgages following news that some of Spain’s biggest banks reported billions in record profits last year.

On Wednesday, BBVA reported a 2022 profit of €6.4 billion, the largest profit in its history. Driving this profit, the bank’s interest margin grew by a whopping 30.4 percent, commission income by 12.3 percent, and loans by 13.3 percent.

Banco Santander posted an annual net profit of €9.6 billion, up 18 percent from 2021 and higher than forecasted by analysts polled by financial data firm FactSet.

READ ALSO: Banco Santander posts record profit as rates rise

Given these record-breaking profits, especially against the backdrop of a prolonged cost of living and inflationary crisis in Spain, Díaz has said the government must act decisively to “freeze mortgages” and “moderate profits.”

“The crisis cannot be an excuse to earn more,” she said, adding that the rise in the Euribor rate is “very serious”, with the average increase (estimated to be €258 per month) “impossible to bear” for normal Spaniards.

Euribor is the interest rate most often used to work out mortgage payments and calculate both variable and fixed rates.

READ ALSO: What the Euribor rise means for property buyers and owners in Spain

It is anchored to the interest rate set by the European Central Bank (ECB), and, as we are now seeing, quite responsive to global economic events. By the end of January, the rate had risen to almost 3.4 percent, the highest level since December 2008.

“While the rise of the Euribor will increase the average mortgage payment by €250 per month, BBVA’s profits grow by 38 percent to reach €6.4 billion, the largest in its history. The crisis cannot be an excuse to earn more. Freeze mortgages, moderate profits,” Díaz wrote on Twitter on Wednesday January 31st.

Banks respond

Unsurprisingly, Spanish banks are not exactly keen on Díaz’s idea. BBVA President, Carlos Torres, said “I trust what will happen is that the benefits of a market economy continue to be defended”. 

Torres also tried to remind people of the “negative years” that BBVA has endured, with “many billions of negatives”. 

It remains to be seen how persuasive Spaniards or the Spanish government find this comparison, or whether Díaz’s Twitter idea will translate into policy.

Windfall tax

Díaz’s call for a mortgage rate freeze is in line with the Spanish government’s approach to the excess profits of banks and energy companies. In July, the Spanish government introduced a temporary windfall tax on excess profits in order to fund some of the extraordinary measures it was implementing to help the most vulnerable in Spanish society deal with the cost of living crisis.

The government in July introduced a draft bill to slap a temporary 4.8 percent charge on banks’ net interest income and net commissions in 2023 and 2024 to fund measures to ease cost-of-living pressures. Between the new taxes on banks and energy companies, they should generate around €7.0 billion for the state coffers in 2023 and 2024. 

However, in November the ECB published a non-binding legal opinion that suggested Madrid undertake a “thorough analysis of potential negative consequences for the banking sector” of the tax.

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