Buying a House in Spain as an Investment: Rental Options and Returns

You're considering buying a house in Spain, not just as a holiday home, but also as an investment. The question you're asking yourself is: can I make money with this? And if so, how much?

The answer is yes, investing in Spanish real estate can yield excellent returns. But as with any investment, there are rules, costs, and realistic expectations to consider. We regularly see Dutch investors surprised by the rental practices in Spain. Let us explain exactly what you can expect.

Holiday Rental or Long-term Rental?

The first choice you'll have to make is the type of rental. Both have advantages and disadvantages, and the best choice depends on your goals and the location of your property.

Short-term rentals (holiday rentals) involve renting out your property to tourists on a weekly or weekend basis. This generally results in higher rental prices per night, but occupancy rates are seasonal. During the summer months on the Costa del Sol or Costa Blanca, properties can be full, but January and February can be quiet.

A two-bedroom apartment in a prime holiday location like Marbella or Javea rents for around €800-€1,400 per week in high season, and €500-€800 per week in low season. With an average occupancy of 20-25 weeks per year, you'll achieve a gross rental income of €15,000 to €25,000 per year.

Long-term rental means you rent the property to a single tenant for at least 11 months. This results in a lower monthly income, but you do have a stable income and less hassle. The same two-bedroom apartment rents for €800-€1,200 per month annually. This translates to a gross rental income of €9,600 to €14,400 per year.

The advantage of long-term rentals is stability and significantly lower management costs. There are no cleaning fees between guests, no constant marketing, and less wear and tear. The downside is that you can't use your own vacation home whenever you want.

For most investors who also want to enjoy the property themselves, holiday rentals are the preferred option. You can choose your own arrival times, and rent out the weeks you're not there.

Realistic Rental Income Per Region

Rental prices and occupancy rates vary greatly by location. Not every location in Spain is suitable for successful rentals.

Costa del Sol - Prime locations: Marbella, Puerto Banús, Estepona, and Nueva Andalusia are popular with international tourists. A modern two-bedroom apartment with a pool and close to the beach can fetch €1,200-€1,600 per week in peak season. Expect an occupancy rate of 22-26 weeks per year, especially with professional marketing and good reviews. Gross annual rental income: €20,000-€30,000.

Costa del Sol - Mid-range areas: Fuengirola, Torremolinos, and Benalmádena offer more affordable properties that also rent out well. Rents are lower (€700-€1,000 per week), but occupancy rates can be comparable. Gross annual rental income: €15,000-€22,000.

Costa Blanca - Prime locations: Javea, Altea, Calpe, and Moraira attract a quieter, often older demographic. Rental prices are comparable to those on the Costa del Sol mid-range. A well-maintained apartment with a sea view fetches €800-€1,200 per week. Gross annual rental income: €16,000-€25,000.

Costa Blanca - Popular expat areas: Torrevieja and the surrounding area have lower rental prices (€600-€900 per week) but high demand from Northern Europe. Occupancy rates can be high due to the large Dutch and Belgian communities. Gross annual rental income: €12,000-€18,000.

Legal Requirements and Permits

This is where things get serious. You can't just start renting out your vacation rentals in Spain. You need a tourist license (licencia turística), and the rules vary by autonomous region.

Andalusia (Costa del Sol): You must register your property with the regional government and meet minimum quality requirements. The property must have certain amenities, such as air conditioning, decent furniture, and a properly functioning kitchen. The application costs between €200 and €500 and takes approximately 2-3 months.

Valencia (Costa Blanca): The rules are stricter here. Besides registering with the regional government, you also need a municipal permit. Some municipalities limit the number of permits, which means it can be harder to obtain one. The cost is between €300 and €700.

Renting without a permit is risky. You can face fines of up to €30,000, and platforms like Airbnb and Booking.com are increasingly removing listings without a valid permit.

At Hibaroo, we help you apply for the necessary permits and ensure everything runs smoothly. This isn't a side issue—it's essential for legal rentals.

Taxes on Rental Income

Rental income in Spain is taxable, and how it is taxed depends on your resident or non-resident status.

As a non-resident, you pay 19% tax on your net rental income as an EU citizen. You can deduct expenses such as maintenance costs, community fees, IBI (Income Tax), insurance, and depreciation. From your gross rental income of €20,000, you can often deduct €5,000-€7,000 in expenses, bringing your taxable income to €13,000-€15,000. The tax liability then amounts to approximately €2,500-€2,850 per year.

As a resident, different rates apply and you can claim more deductions. It's wise to discuss this with a tax advisor who understands both Dutch and Spanish tax law.

Don't forget that you may also be required to file a tax return for this income in the Netherlands. The tax treaty between the Netherlands and Spain prevents double taxation, but proper administration is essential.

Rental Costs: Where Does Your Money Go?

Renting involves significant costs that impact your returns. Many novice investors overlook these or underestimate them.

Property management fees: If you don't live in Spain yourself, you'll need a property manager to hand over keys, resolve issues, and inspect the property. This costs 12-18% of your rental income. So, on a gross rent of €20,000, you'll pay €2,400-€3,600 per year.

Cleaning costs: The property must be cleaned and refreshed between each tenant. This costs €60-€100 per session. For 20 rental periods per year, this amounts to €1,200-€2,000 per year.

Platform commissions: Airbnb charges a 3% commission from the host, while Booking.com often charges 15-18%. If you earn €20,000 gross through these platforms, you'll pay €600-€3,600 in commissions.

Maintenance and repairs: Budget at least 10% of your rental income for maintenance. Air conditioning breaks down, furniture wears out, boilers leak. On a €20,000 rent, this means €2,000 per year.

Utilities during vacancy: During the months your home is vacant, you still pay electricity (minimum), water, internet, and community fees. This can amount to €1,500-€2,500 per year, depending on the vacancy.

Insurance: A good rental insurance costs €400-€800 per year and covers damage caused by tenants and liability.

Add this up, and you'll quickly reach 40-50% of your gross rental income in expenses. From €20,000 gross rent, you'll still have approximately €10,000-€12,000 net, before taxes.

Realistic Return: A Concrete Example

Let's calculate a complete example of an apartment on the Costa del Sol.

Purchase price: €250,000

Additional costs (10%): €25,000

Total investment: €275,000

Gross rental income per year: €20,000

Costs:

• Management (15%): €3,000

• Cleaning: €1,500

• Platform commissions (10%): €2,000

• Maintenance: €2,000

• Utilities vacancy: €2,000

• Insurance: €600

• Community fees: €1,200

• IBI: €700 Total costs : €13,000

Net income before tax : €7,000

Tax (19%) : €1,330

Net income after tax : €5,670

Net return : €5,670 / €275,000 = 2.06% per year

This may seem disappointingly low, but don't forget there's also appreciation. Spanish properties in good locations appreciate by an average of 3-5% per year. At €250,000, this translates to €7,500-€12,500 in annual value appreciation.

Total return (rental income + capital appreciation): 4.8% - 6.6% per year, which is a healthy return for real estate.

The Best Locations for Rentals

Not every location is suitable for renting. What should you keep in mind?

Beach proximity: Homes within a 10-minute walk of the beach rent out significantly better. The difference can mean 30-40% higher occupancy.

Swimming pool: A communal or private swimming pool is practically mandatory for good rentals. Properties without a pool are more difficult to rent out and at lower prices.

Airport proximity: The closer you are to the airport, the more attractive it is for short-stay guests. A maximum of 45 minutes' drive is ideal.

Amenities: Supermarkets, restaurants and activities nearby make your home more attractive.Parking options: Having your own parking space is a big advantage, especially in busy coastal areas.

The Costa del Sol and Costa Blanca both offer excellent rental locations, but within these regions you need to choose carefully.

Pitfalls of Real Estate Investing in Spain

We regularly see the same mistakes made by new investors.

Overly optimistic occupancy rate: Beginners expect 30-35 weeks of rental per year, but realistically 20-25 weeks is required, even with good marketing and reviews.

Underestimating management costs: Thinking you can manage it yourself from the Netherlands. In reality, you need someone on-site, and that costs money.

Bad location: A cheap apartment inland seems attractive, but rents poorly. Pay more for a better location.

No maintenance buffer: Especially with vacation rentals, everything wears out faster. Budget at least 10% for maintenance.

Failure to arrange a permit: Without a tourist permit, you run legal and financial risks.

How Hibaroo Helps You With Your Investment?

At Hibaroo, we have over 20 years of experience supporting investors in Spanish real estate. We don't just help you find the right property, but we also consider its rental potential from the very beginning.

We analyze which locations have the best occupancy rates, which property types rent out best, and what realistic returns are. We arrange the tourist permit for you and connect you with the best property managers in your area and price range.

Our approach is transparent: we show you the realistic costs and benefits upfront, so you can make a well-informed decision. No rosy promises, just honest figures based on years of experience.

Want to learn more about investing in Spanish real estate? We'll analyze your situation and find the best opportunities within your budget. Or browse our current selection of properties with excellent rental potential on the Costa del Sol and Costa Blanca.

Conclusion: Is It Worth the Investment?

Investing in Spanish real estate can certainly be profitable, but it's not a matter of passive income. Successful rentals require the right location, professional management, effective marketing, and realistic expectations.

A total return of 5-7% per year (rental income plus capital appreciation) is healthy for real estate, especially in the current economy. But the key is: buy smart, calculate realistically, and get good advice. Then your Spanish property can be not only a wonderful place to enjoy, but also a solid investment for your financial future.