GUIDE TO RENTING
For the owner
If you have a holiday home on the Island , renting out your property is certainly a good way to cover some of the costs of maintaining it, and is usually a much better option than leaving it empty most of the year. Equally as an investment and possible future pension income , (and considering the low interest rates at the moment) a rental property is a worthwhile consideration due to the strong property market and all the cheap ticket-less airlines coming into Palma today.
However, just because the idea of renting your property seems attractive to you, it does not mean that you should dive right in and put your property on the Web to market it yourself directly, or even on the books of a lettings agent without a second thought. mallorcapropertydirect.com has compiled the following guide to give you a few helpful tips before you start venturing down this road, and to assist you in the process to help you along the way.
Renting out on a mortgage
Mortgage providers in Spain typically are not keen on giving out loans on a second home if the property is to be let long term , due to the risks involved; getting rid of unwelcome guests can be a long and painful process. On the other hand, properties which are vacant for the majority of the year are a high security risk, and so most mortgage providers are prepared to turn a blind eye to renting out a holiday home from time to time.
Should you however, intend to rent out your property for the majority of the year you should check with your mortgage provider that they are happy for you to let your property. Inform them in writing of the fact that you wish to sub- let. Failing to get their written agreement could be a breach of your mortgage conditions and you may end up with problems on your hands. Some lenders may give their agreement subject only to certain conditions, which you need to be fully aware of. You should bare in mind they may in fact want to marginally raise the rate of interest on your mortgage loan or charge an additional administration fee.
Don't assume that your existing insurance policies will automatically insure your property if you let it out, in fact it probably won't. Scrimping on a little extra per month may lead to financial ruin if your holiday rental or tenant burns down your home. Generally there will be a slight increase in the level of your premium to accommodate the extra risk of having your property occupied by tenants, but it is most definitely worth it!
Types of rentals
There are two types of rentals to consider, long term rentals or lets and short term rentals/lets:
Long term rentals
This form of rental can provide a more regular, relatively guaranteed income for your property which will hopefully cover your mortgage and maintenance, and may even give you some spending money for the month . The law allows you to ask the tenant to pay the council tax, but this is normally included in the rental price. The rent normally also includes any community fees and water. The landlord is also responsible for any necessary repairs. During this time of course, your property should be appreciating , thus in time, your tenants will hopefully be paying off your mortgage.
You should ask your legal representative to draw up an official contract ( Contrato de Arrend de Vivienda ) which both you and the your tenants should sign prior to taking up residence (click here for a recommended legal advisor). Do be aware that for long term rentals here in Spain the law allows the tenant to extend up to 5 years! Your legal advisor should ensure there is a clause in the contract specifying the duration of the rental, and stipulating that you require it back, for personal use, by a certain date. Be warned, should you merely rent it on again, rather than use it yourself or for your family, the previous occupant can legally challenge this in court. It is also worth noting that should you decide to sell after the rental period, your tenant has a preferential right to purchase.
Short term rentals/holiday lets
Short terms rentals can be a real bonus, particularly if you wish to make use of the property yourself at times. They can also provide a lucrative source of extra income as they can generate anything from 15 to 50 percent more than normal long term rental prices. For this reason, some landlords actually prefer to rent short term, doing their utmost to minimise empty periods. This strategy can work for some properties in some areas, but it can be risky , as your property has a good chance of lying empty between lets. For short term lets of more than a week at a time you also may feel it necessary to draw up a Contrado de Temporada, a contract of temporary residence explaining clearly that the tenant has another address to prevent the right to a five year rental. For short term weekly holiday rentals, it is not normally deemed necessary – but speak with your legal advisor to confirm (click here for a recommended legal advisor).
Most short lets are catering for holidays, but there are occasionally business people working here on a short term basis, or in particular, and due to the nature of this Island and if your property is close to the main marinas, yachting crews.
Holiday lets come in all guises, whether they be smaller apartments in popular resort areas, chic city apartments for city breaks or high quality fincas in the countryside. But the most successful are also presented with an attractive décor and furnished to a high standard. However, if your property does not fit this bill, it does not mean you won't be able to find a short term tenant. Excellent location, proximity to useful transport links, pleasant grounds or some other appeal can also make your home attractive to certain tenants.
How do I go about this?
You firstly have to consider whether you want to use a lettings agent to manage this for you or whether you want to deal with it yourself. If you're here on the Island and have flexible working hours, or even don't mind giving up some weekend time, then why not manage it yourself and maximise your income? Simply click here, and then click on "Register Your Details", or go to the Home page, click on Add a Property Now ” on the left menu to register your property with us, and follow the simple instructions on the screen.
You could also consider an agency; they will require payment of approximately 1 month's rental, whether it be a booking agency or a full service rental agency. Sit down with them and ensure you understand all of the terms and conditions, how they plan to advertise your property and what is included in their commission.
If you use both mediums and get the booking yourself through mallorcapropertydirect.com perhaps you could negotiate an agreed smaller percentage for managing the booking? Alternatively you could look at hiring a property manager who will co-ordinate the cleaning, maintenance, and meeting and greeting of your guests for a set fee or smaller commission. In time you will be able to gauge for yourself which you prefer. If you decide to use a lettings agent, use an agent in your local area and make sure the rate you ask them for is net of all fees.
You will also have to take into consideration Spanish Income tax on any income you receive from your rentals. As a resident you should declare your rental income as part of your earnings which will be taxed at the normal income tax rate. If a non-resident , you will be subject to a tax of 25% on income earned in Spain, but it will be up to you to declare it.
If preparing your home for a long term rental you will have to decide whether you are going to rent it out furnished or unfurnished. If unfurnished, you will merely have to ensure your property is professionally cleaned throughout before you hand it over to your tenants.
If fully furnished or if merely renting it out to the holiday rental market, the following information has been prepared to help prepare your rental property:
Furnishing and equipping your home
When furnishing your home with a view to renting it out, you should bare in mind that although there are many careful people in this world, no-one will care for your home as well as you. You should balance practicality, robustness and ease of cleaning with style and quality , with the latter being reflected in the rental rates you are able to charge. Things will get broken, as they do in your main home, so don't incorporate items you will be upset with losing.
Kitchens: should be fully equipped . A dishwasher, microwave, washing machine and dryer are essential items these days – your rental will be more popular if you incorporate them. Ensure you have enough crockery, cutlery, pots, pans and glassware to cater for the number of guests you can accommodate. All should be left clean and unstained. Kitchen cleaning supplies and kitchen towel should be easily accessed and the cupboards should hold basics such as salt, pepper and sugar.
Bathrooms: Shower gels, air freshener and bath mats are not essential to letting, but certainly contribute to your guests' comfort. Spare toilet rolls, soap and bin liners should be easily found and a hair dryer will be expected.
Beds: it is always nicer to sleep on a bed with some sort of mattress protector, rather than sleeping on a sheet covered mattress. They should be of good quality and comfortable. Pillows should be clean and relatively new, again we recommend using protectors over new pillows. A bedside table and light should also be provided, with ample storage, hanging space and good quality hangers.
Linens: allow at least two sets of linen for each bed, and two sets of towels. Provide a good supply of tea towels, table cloths and place mats.
Other items: A balance should be struck with providing a nice homely feel incorporating such items as books, ornaments and pictures so as not to feel like a hotel, and not over cluttering the place with cast-offs and rejects from your main home.
Televisions, stereos, videos and DVD players are becoming more of an essential requirement these days, so excluding them may mean losing bookings. If you have a telephone, we would recommend you un-plug it during your letting periods.
Personal items: Allocate a storage area or cupboard in which to keep your personal belongings or items of high sentimental value, and keep it locked while you are away.
Prepare an information pack
If yours is an expensive home, get a professional inventory done. Make sure it is thoroughly detailed. You can reuse it when you renew your household insurance cover. Otherwise prepare one yourself and ensure you leave a copy out in a prominent area of your home where the tenant can see it. Ensure you take a substantial deposit from the tenant to cover any possible damage; we recommend from between 10 and 25%.
Prepare a welcome letter and/or a guest information pack , incorporating relevant and specific information about your property (rubbish, smoking policy, etc.), and the area, to include a few recommendations of restaurants and bars. A list of useful numbers should also be included, e.g. emergency services, police, taxi, consulates, etc. and an island map, and even a guide book are good additions.
Cleaning and Maintenance
A clean and well maintained property is vital to a successful rental, so first and foremost finding a good, reliable cleaner is essential, particularly with back to back bookings. If the rental is for longer than a week, it is a good idea for linen to be changed every 7 days, usually at your expense, unless it's a long term let.
A telephone number should be available to call in case of problems or queries to do with the property. Mechanical problems and faults should be dealt with as promptly as possible. Make sure you or your have numbers of electricians, plumbers or general repair men to hand.
Upon receipt of a holiday rental booking, a standard letter of confirmation should be sent by email or post, to include deposit and bank details, booking dates, and clear directions to the property. If a long-term rental, get your legal advisor to compile a contract, see “ Starting Out ”. Records should be kept of all outgoings and expenditure relating to the property in order to offset them against your tax – have an accountant file the return to maximise on the allowances and the expenditure you are able to offset.
Welcoming your guests
Whether you decide to manage your property yourself or through another representative, guests will always prefer to be greeted either on arrival or preferably the next day – this will help to familiarise them with your property, the region, and answer any initial queries or concerns. Another nice addition would be to leave a starter pack of key essentials such as fresh milk, bread, butter, tea and coffee, particularly if your guests are to arrive late. A bottle of local wine or cava will also be perceived as a nice touch.
Arranging for someone to be there upon your guests' departure is advantageous in order to check that no damage has been done to your property or its contents, and to return the deposit if relevant.
This information has been supplied to assist you with this decision and is only meant to be used as a guide. It is not intended as a substitute for legal advice. Please read the site disclaimer notice for further information (click here for a recommended legal advisor).
When making bookings or ordering anything on-line everyone expects good service and a swift response; ensuring you set up efficient systems is essential to the smooth running of your rental property. This section is primarily for those who have decided to manage their own property rentals, but even if you use a full service lettings agent these are items you should be aware of:
Ensure you keep an up to date bookings calendar or chart to keep track of your bookings and availability – the last thing you would want to deal with is a double booking! Advertising on mallorcapropertydirect.com will give you access to your own availability chart, which should be kept regularly updated. However, since you are not always on-line, a backup diary or calendar would be a good idea.
Responding to enquiries
Once an enquiry is received it should be responded to quickly and efficiently, giving availability and answering any questions they may have. It is perfectly acceptable to ask the expected numbers of guests, ages of children and arrival and departure times. Don't forget on your calendar you will have changeover dates to allow for departures and arrivals.
Once your enquirer has confirmed their booking, a standard letter of confirmation should be sent by email or post, to include all relevant details incorporating deposit and booking conditions , bank details, booking dates, and clear directions to the property. As soon as a deposit is made your booking should be considered confirmed, please ensure you keep your availability calendar updated.
For longer term rentals the standard deposits (fianzas) paid in Spain are 2 months rental for a furnished property 1 month's for un-furnished, with monthly payments in advance. However for holiday rentals we recommend an initial deposit of between 15 and 20% to confirm a booking. If in the same currency zone, cheques or cash into your bank account will inevitably be the best method of payment, or if guests live abroad, then bank transfers. It is then up to you whether further payments are made or if the guest brings the remainder of the money with them on arrival – please note that since there are no guarantees or official travel bonds that most guests would prefer not to make a full payment prior to their arrival. As long as they bring enough money with them to cover a deposit for breakages it will hopefully be agreeable to all.
For any unanswered questions, or if looking to rent a property, please refer to FAQs (Frequently Asked Questions).
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