Renting Appartment Spain Madrid

Real Estate
1

Hi everybody,

For the context, I have inherited an 4.5 apartment in the center of Madrid. The fiscal value is ~250k€ and when I see similar apartments in the area to be sold, its real worth is at least 500k€. The apartment is in good shape, however the bathroom + kitchen is old (but functional).

I love Madrid and I’m going there multiple times per year. For a long time the apartment was not used, and obviously when you go there you have to fix electricity and water (I was going to hotels instead since the contract was not under my name). Now since it’s mine, paper work + electricity/water will be fixed this year.

I was thinking that since I am not going very often, it may be worth it to renovate it into something really cozy (for myself) and use something like AirBnB to rent it out. This would ensure that the apartment is not dead and working when I decide to go. According to multiple websites, it seems that Madrid is an excellent place for AirBnBs with 82% occupancy rate and the average price is 140€ for all appartments. Renting is easy below 90 nights per year and then you need a tourism license (which I don’t know how easy it might be to get it).

Let’s assume (rough estimate) the bare minimum which is:

  • 90 nights at 140€
  • 24% taxes (maybe 19% since I have an EU passport/living in Switzerland)
  • 30% fees AirBnB + intermediate to take care of answering messages, going there if there is a problem etc (maybe less)
  • 6% fees for internet, water, electricity, etc

The lower bound seems to be around 5k€ profit. If the tourism license is easy to get, this could easily double. It doesn’t seem bad to me for an holiday apartment.

What are your thoughts on the situation? Does any of you have any experience in general about renting a place via AirBnB and things to be careful with (e.g., some bad events with guests, hidden fees, reviews)? Similarly with apartments you may own but don’t go often? Also a random note: can the renovation cost be deduced from the Swiss taxes (or Spanish ones)?

Thank you for the discussion and your answers!

2

The ratio of time spent for renting short term instead of long term will generate extra work from a ratio of 10 to 1.
You won’t have any tenant on site if an issue arise (tv, aircon not working, water leak, no hot water…).
You will have to go in person or having a clear contrat to the concierge agency and delegating a lot.
If you do not have local handyman it may be an assle to delegate and not get over charge.
What about renting for your professional that will stay few months ? At least they could open the door to the engineer,

Also furnitures will deteriorate a lot with Airbnb as people do not care. Make sure to limit the hearting remotely in winter or people will set it to maximum.

Lastly be aware of disabling auto booking and avoid Mac and prostitute renting your flat to record a porno or just making money. It happens to my cousin and the review of the following guests were not nice as cleaning ladies always missed some objects left in haste…

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3

Having a fair bit of experience with real estate in Spain (owning, property development, long-term letting, short-term letting), this would be my personal advice/opinion:

Unless you are going to permanently live the property or live near the property (to manage Airbnb rentals), find a good buyer and sell. Invest the money elsewhere.

The reason: Spain’s bizzare squatter rights.

Unless you take great care to filter out potential squatters, you will inevitably get squatters posing as tourists/visitors who will use Airbnb as a way to get into your property and claim squatter rights.

The same largely holds true for long-term rentals.

It is different if you live on site and can manage the Airbnb rentals yourself, and immediately report people who delay in leaving your property to the police before the very short qualification period for claiming squatter rights expires. In that case, Spain can be a fantastic Airbnb investment with exceptional returns, especially in tourist hotspots.

Using a local Airbnb management service and private security company can reduce the risk of squatters, but not eliminate it.

For long-term rentals, it is crucial that you only rent to people you know and trust (whether or not you live on site).

Frankly, if you could get 500K for the property, you could consider using that money to buy something here in Switzerland which you can rent out or Airbnb without the risk of squatters.

There is also the option of putting the money into real-estate funds for a completely passive investment.

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4

Besides the others post.

I believe that the 24% taxes is not accurate, I remember something closer to 40% for not residence people.

Also as far as I know you need to have a license to be “legal” and at least in other cities the license is only given if the whole building is for short term rentals.

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24% IRNR for non residents in Switzerland. no deductibles possible.

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Thank you everybody for your answers!

@FunnyDjo Do you think having a company OR a person to take care of the listing would be sufficient to avoid any trouble?

@Daniel Woaw this is a surprise about squater rights. Did you encounter this problem? How does the law work exactly? If a company/person taking care of the listing ensures that people leave the place, how can this happen? (Certainly a naive question).

Thank you again every body for your insightful answers!

7

I’ve watched a documentary about squatters in Spain but you may have the same problem in France as well. It takes about 18 months to recover the flat.
What about finding a local agency and mention this problem to them ?
Give us a feedback on what they would offer ?

Try the experience for 1-2 years and let us know what issue arise.

The very nice thing about real estate investment is leverage. That what makes it very valuable to build up wealth with money from the bank. The cons will be link to manage tenants, deterioration, handyman …

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I am not sure if you are aware about the current protests against tourism but if you are the owner of an Airbnb property in Spain I think you are currently somewhere close to being public enemy no 1. So be aware that legislation has a big chance of changing.

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9

I did (and do), because my sister owns a mid-sized real estate company in Spain (real estate development, property management, holiday apartments, etc.).

It works like this: Once a person/persons have been in a property for 48 hours, you are not allowed to evict them without a process. That is true whether they break in or are granted entry (on account of renting, for example), albeit breaking in would create a separate petty criminal case while being given access would not.

The eviction process can take between months and years. If you don’t have good connections, then you should count on years rather than months. Holding the squatter legally liable for loss of rental income and damages to the property is nearly impossible. You can theoretically cut off the utilities to avoid their raking up costs for you, but even that is a bit sensitive from a legal perspective.

If you live in your own home (as many people in Spain do), the risk of your property being squatted is obviously smaller, especially if you have a security service to guard against break-ins in your absence. If you only rent out your property to obvious tourists and not to locals or wanabe locals, you also shouldn’t have too much trouble.

Registering the property as a commercial property/hotel can also help to reduce the complexity of the eviction process.

If you live on-site or find an excellent property manager to handle Airbnb rentals for you, the returns in Spanish tourist destinations are exceptionally high. But unless you want to make it a full-time career, my personal advice would be to get the best price you can and find a more passive investment with lower risk.

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Daniel is right in this instance; the squatter rights is a very backward system and is certainly not an attractive option if you’re not there to oversee the property. However, that being said there are a number of insurance companies that offer higher premiums so you can avoid potential squatters - in Spanish they’re called “Okupas”.