Buying a property overseas to enjoy as a second residence, or holiday home, is a big dream for many. While Northern Europe, Canada and the US are wrapped up against cold winds and snow, here in the province of Malaga in Andalucía, we’re enjoying 21 degrees and sunny, blue skies. I kid you not.
Is Spanish property a good investment?
The draw to invest in a property in Spain is great. The Spanish economy is one of the fasting growing in the Euromarket and the property market encouraging. Don’t expect to still bag a bargain – prices are on the up, but they remain realistic. At Move to Malaga we believe that now is a great time to buy, and if you are a savvy investor, you can turn your holiday home in southern Spain into a profitable holiday rental business.
Andalucía is the second most popular tourist destination in Spain, and Spain the third most popular tourist destination in the world. This gives you an indication in terms of the return on investment you could enjoy if you purchased a property in Spain. Using it as both a personal holiday home, and renting it out as holiday accommodation during the periods that you’re not here.
Move to Malaga’s Top Tips For Purchasing a Rental Investment Property in Spain:
Property purchase price vs. rental rates
If you need to take out a mortgage to purchase your home in Spain, then the monthly mortgage payments should be taken into account, together with the running expenses, when you are setting rental prices. The rule of thumb is that the 12 weeks of high season between June and September should pay your 12 months of mortgage. Any other weeks that you rent out the property, should then cover expenses.
Of course, this is an ideal scenario. It may take you a couple of years to achieve this, and it will mean sacrificing your summer holidays to earn rental income in peak season. However, buying an investment property on the Costa del Sol means that if you market the property well, you can be guaranteed all-year-round bookings. Golfers and those escaping the cold winters from November to March, Easter holidays, summer holidays, and half-term in October.
Another rule of thumb is that your high season weekly rates will be roughly the same as what a long-term rental might achieve per month. You can see the ROI potential here for short-term holiday lets.
In fact, if you’re serious about earning a good income from your rental investment, then expect that the first couple of years you’ll only be visiting the property in between guests to carry out maintenance checks, replacing damaged goods, stained towels and bed sheets, etc. It will be worth it though to secure your home in the sun investment.
Your ideal guests should dictate the home you buy as a rental investment property in Spain
If you want to achieve positive results with your holiday rental business. Achieving a good, regular income, customer satisfaction and repeat guests; you need to first think about your ideal guests. Remember this is not just a business, it’s also your second home, so ideally you want to attract guests who are just like you! Who you can trust and you know will enjoy your home and take care of it.
There are various different traveller types that you should take into consideration when deciding on your ideal guest.
- Business travellers
- Young Couples
- Retired Couples
- Travellers with disabilities, to name a few
When choosing a location for your rental investment in Malaga, think about where you would enjoy a holiday – would it be beach, rural or city? Stand-alone villa with the kids, or beachside penthouse?
If you consider that often your ideal guests are just like you, picking what you like, will generally resonate with them.
If you want to attract families, it’s important to pick a safe environment, away from busy roads, perhaps in a closed urbanisation, with a pool; or a stand-alone villa in a laid-back, tranquil environment, but within close proximity to the beach and amenities, such as supermarkets and restaurants. An ideal location might be Alhaurin el Grande, or Mijas Pueblo or Campo for example. Lots of space to play, you get more for your money in terms of property size, but you have everything on the doorstep that you need, and in 15 minutes can be on the beach or at the airport.
Young couples without children might want to be situated in busier areas, with a more upbeat ambience. Close to bars, restaurants and nightlife. A city environment, such as Malaga city, or the beach resorts of Marbella and Puerto Banus, are three good examples.
Older travellers might be looking for a more peaceful area, yet with amenities around them, so they don’t have to travel too far. Alhaurin el Grande, East of Malaga and Marbella East are all good areas to consider.
The business travel market is also an important one. More and more business travellers are choosing Airbnb and vacation rental accommodation over hotel stays, for their flexibility, space and comfort.
If you want to attract business travellers you should consider a city environment or city suburb. Malaga has both an important technology park (Parque Tecnológica de Málaga), as well as an important convention centre (Palacio de Congresos de Málaga), both of which bring many business visitors to the city every year. So purchasing an Airbnb rental in Malaga city, or one of the suburbs, such as Alhaurín de la Torre, Cerrado de Calderon, or Campanillas, will mean you can enjoy the lion’s share of business traveller bookings.
If you are targeting business travellers, take into account that their stays are shorter, which means a higher volume of changeovers and management required. Take a look at this article I wrote about attracting business travellers to your vacation rental.
Other things to take into consideration when choosing a holiday rental investment property are great views, noise pollution, distance to the airport and activities: golf, beach, parks, water parks etc. Again, think about your ideal guest. What will attract them?
Property size for your rental investment property in Spain
The size of the property you choose will depend on two factors:
- Your purchase budget
- Ideal guest profile
If you want to attract families and larger groups, but don’t have a high budget, then consider a rural property and make your niche, ‘rural holidays in Andalucía’. You might think that this isn’t a popular holiday type, but rural Andalucía is enjoying one of the biggest growth in tourism figures in Spain. Areas such as Alora and Pizarra, with the Caminito del Rey, El Chorro lakes and some of the best climbing in Europe, is a winning destination for holiday rentals and bed and breakfast businesses.
If your ideal guests are younger or older couples, travelling without children, then buying a smaller holiday apartment is perfect. Aim for small, but perfectly formed.
If you want to attract families, or family and friend groups celebrating a special anniversary or event, then you should be shortlisting villas, rural fincas or large townhouses. These will also appeal to business travellers who are organising corporate events, client incentive trips or bonding sessions for employees.
Note: Here in Andalucía you must register a property with the Junta de Andalucía if you wish to rent it out as holiday accommodation. You are only allowed to register a property that offers a maximum of 15 guests, or 6 bedrooms. So don’t go too grand, without first doing your research. We can help you through the registration process. Read the article on registering a holiday rental in Andalucía on our sister site, Rental Tonic.
Layout & Features of your rental investment property in Spain
When purchasing a holiday property in Spain, it’s also important to consider the layout of the villa, especially when targeting larger groups. Is there space for children to play, and adults to relax? Are children’s bedrooms located close enough to the parents. When you promote a vacation rental to larger groups, it’s important to include a floor plan or video tour in your rental marketing images.
If you want to appeal to travellers with disabilities, then you must consider a property on a flat plot with no stairs, wider entry points, wet rooms as bathrooms, and a pool lift. In fact, we spent six months last year, finding just that for a client. He had to make minimal changes, as the property used to be a wheelchair-friendly bed and breakfast. As property finders, it’s our job to find you the property that matches your exact needs, and those of your ideal guests.
Here is an article that I wrote on setting up holiday accommodation for guests with disabilities. As there are so few properties that offer accessible accommodation in Spain, you could get a very high return on your investment if you spend some money adapting the property.
As well as the type and layout of the property you must also consider how to equip your vacation rental to attract your ideal guests. Features such as air conditioning (essential to register your property), good kitchen appliances, comfortable beds, free WiFI (essential to attract today’s travellers) and cable TV, are all standard needs for today’s holidaymakers. But if you want to attract families, then make sure you offer baby equipment, games and videos.
Start with deciding on your ideal guests and purchase budget. Get in touch with our Move to Malaga team and we’ll help you find and purchase a property that appeals to your ideal guests and ultimately will be your dream home in the sun. Our sister company, Rental Tonic can then help you register the property and even give you advice on marketing the property to maximise your ROI.