Welcome to the fourth and final part of my series on Spanish homeownership. Here, we’ll discover how to become a landlord and find a tenant in Spain. Make sure to read the previous articles if you haven’t yet:
- Part 1: Intro to the process
- Part 2: Payment options and mortgage
Congrats if you’ve made it to the stage of becoming a homeowner! Of course people buy property for various reasons, such as to live in it themselves, or as a long-term investment to rent it out.
I was encouraged to invest my savings in property because I felt like it could be a wise long-term investment that I could use in the future when I retire. I did this because I don’t have a pension or retirement plan (but I could be wrong if something drastic happens to the housing market of course, so it is a gamble!)
I decided to explore the options of becoming a landlord because believe it or not, with my current rent at a fairly competitive rate plus if I am able to rent out my newly-purchased flat in line with the good market value – I would be able to save some money with the rental earnings versus actually living in the flat myself and paying off the mortgage and bills normally. Although I do have the option to live in the newly purchased flat if needed, which is comforting!
Do you need to obtain a mortgage in Spain or Portugal? Check Spainguru’s recommended mortgage brokers
So I started the process to rent out my flat. After renting for various years in a variety of flats, I have done countless interviews at looking to rent flats, as well as interviews for finding flatmates. I’ve also had very bad contracts, or no contracts at all, and I was determined to try to do everything in the most fair and legal way possible.
Is the property suitable for living?
Before you get any further, make sure your property is suitable and safe for living. And if not, make sure you fix it! This is your responsibility as a landlord. I was lucky that my flat was in excellent condition so I didn’t have to do much, but these were the few things that I noticed and fixed beforehand: changed the locks, changed the bathroom sink/cabinet unit, added a shower towel rack, adding door stops throughout the flat, fixed a door that was hard to open, and painted a crack on the wall out in the patio.
Type of arrangement
Looking to buy property in Spain to rent out as a tourist flat (such as airbnb) or a regular rental property? There are of course pros and cons to each of these options.
A tourist flat/airbnb
- Pro: Could potentially generate a higher amount of income
- Con: The flat must be furnished (added expense) and it is a job that takes time and money to properly manage the property for tourists/for paying an agency to do so. There are also many rules against these and homeowners’ associations may prohibit this so make sure you check!
Regular rental arrangement
- Pro: With the right tenants, this could provide safe consistency that generates enough to pay off the mortgage (and a bit extra, hopefully) and provides peace of mind
- Con: It may be difficult to first find and keep trustworthy tenants. Earnings potential could be less than a tourist flat/airbnb.
I decided to go this route for a regular rental arrangement!
Different ways to rent out the flat
- Using a rental agency – agencies normally charge at least one month rent in exchange for doing interviews and finding a tenant. The flat could be offered furnished or unfurnished
- Posting on a rental booking platform, such as Spotahome – which would require making it suitable for immediate entry such as furnishing the flat and equipping it with internet
- Using a type of agency, such as this one, that rents a furnished and equipped flat from you and uses it to manage other visitors independently, all while paying a monthly rental fee
- Doing it yourself by creating ads and interviewing tenants, which I explain below
Doing it yourself
The first step to becoming a landlord on your own it to post an ad on rental sites such as idealista.es, fotocasa.es, pisos.com, enaqluiler.com, yaencontre.com
Tips for creating a good rental posting
- Accurate information about the size / location / floor / condition and a clear and honest description which highlights the best aspects of the flat.
- Good photos are very important! Take good clear photos of every part of the property. Do it during the day with natural light, and make sure the space is clean and organized. Make sure the photos are compelling that provide a visual journey to allow people to imagine themselves living at this property
Once you create the rental posting, you can share the link on Facebook groups or other channels.
Interviewing potential tenants
I decided to rent out the flat unfurnished, in the hopes of finding a long-term resident who was able to either furnish the flat with items they already had or were willing to furnish it themselves. In the past, I myself was looking to rent unfurnished flats since I already had my own furniture and I actually found it challenging to find it because many flats already had furniture and many landlords were unwilling to remove the furniture (at least in my experience), so I definitely knew there was a market.
Since mine is a one-bedroom flat, I knew I preferably wanted one individual with a stable income. I would still consider interviewing couples but I knew it would potentially be easier just dealing with one person.
I ended up showing the flat to about 10 different people for over a month. There was some good interest but many of them expressed concerns about the size of the flat (thinking it was too small for them) or they were trying to negotiate for lower rent, but I wanted to stay firm. After a month of searching I was getting increasingly concerned, but fortunately at the end of the month I found a great tenant who is stable and professional!
The main requirement I asked for to prove stability was their last three pay stubs to show that they have a stable source of income and that they would be able to afford the rent.
Rental contract
I consulted with a friend who manages some properties, and she used a template from the Comunidad which seemed very fair. See template here as an example. Note that this is shared for informative purposes only. Some things to note: In the fourth clause, it mentions the length of the contract – which in my case I put that it would be for five years. In the 5th clause it mentions if the rent would increase, in this case I put that the rent would be fixed for the first two years, and starting in the third year it would only increase based on the government’s published inflation index. I encourage anyone thinking of becoming a landlord to put these type of stable clauses in the contracts. It just helps with tenant relationships! These clauses would protect the tenant from huge price changes year after year.
Transferring one month of the deposit with IVIMA
As I am determined to be a completely honest and legit landlord, I was advised to transfer the equivalent of one month deposit with the Agencia de Vivienda Social (IVIMA) of the Comunidad de Madrid. Find out how to do this here. You can do it all online if you have an electronic signature (firma digital). This is a legal obligation that provides more protection for the tenant, and also allows them to legally declare the money they pay on rent on their tax return. Once the rental contract is over, it is easy to request the return of the deposit back from the Comunidad de Madrid through the same website.
Declaring on your tax return
Earnings from the rental property should be declared on your yearly tax return. Make sure to track all receipts and expenses related to maintaining your property.
The trick to becoming a landlord? Patience!
Becoming a landlord in Spain may not be easy at first and patience is needed for all steps of the way. In my experience, so far I’ve been relatively lucky as my tenant hasn’t had any complaints and I was smart to make any minor necessary repairs in the property before she moved in. But it’s all a learning process and don’t be afraid to ask your network for help. Good luck!
