The Different Types of Rental Lease in Catalonia

The Different Types of Rental Lease in Catalonia

In Catalonia, and more generally in Spain, there are different types of rental lease: vacacional (vacation), temporal (medium term), larga estancia (long term). These can be translated into English as: seasonal, medium-term, and long-term. Each offers its advantages and disadvantages, whether they be tax-related, operational, or financial. Before purchasing in Spain, it's important to take the time to establish an investment strategy in order to choose the mode of operation that suits you best.

To guide you, Maen offers an overview of the different types of rental lease.

Vacation Rental (Alquiler Vacacional)

This corresponds to Tourist/Seasonal Rental or Short-Term Rental. It’s the most profitable mode of operation but also the most time-consuming and controlled. With the right ingredients, you can exceed 15% net profitability. However, beyond real estate investment, it is necessary to invest in management to optimize your investment and save time.

In terms of legislation, the Catalan government has been implementing restrictions on tourist rentals for several years. It's a highly controlled and regulated activity. To put a property on this market, you must obtain a tourist license. Today, they are no longer issued in the center of Barcelona (or in Spanish metropolises), the region even threatens to remove up to 25,000 licenses across Catalonia. No decision has been made to date.

Licenses are awarded to housing units and not to the owner, so it’s possible to buy a property in Spain that already has a tourist license. However, be careful with the purchase price, these properties (holders of a tourist license) are often overpriced.

If you wish to invest outside of restricted areas, do not forget to inquire at the town hall to be aware of potential restrictions. Moreover, remember to study the market well, below a certain occupancy rate, tourist rental may not be profitable.

Some advice before renting your property:

• The choice of your service provider impacts the profitability of your property: make sure to check the quality of services: cleaning, reception, marketing, revenue/yield management techniques.

• The furnishing must be thoughtfully considered: the perfect combination between price, durability, and style. Remember to keep all invoices in case of damage.

Medium-Term Rental (Alquiler Temporal)

This corresponds to Medium-Term Rental. The main characteristic of this lease is the duration of stay, ranging between 32 days and 11 months. For this type of rental, it is preferable to offer a fully furnished, equipped, and even decorated property. The target clientele is looking for temporary housing, it’s often a solution chosen by students or foreigners who have just arrived in Barcelona, the ideal for them is to find an "all-in-one solution". The services and amenities are similar to those of tourist rentals.

Legally and fiscally: this type of lease allows the owner to charge the agency fees to the tenant. Taxable income is calculated on a 100% basis, deductible expenses include the following: IBI (Property Tax), community fees, charges not passed on to the tenant (electricity, water), your mortgage interest… Be sure to consult with your tax advisor or “gestor”.

Some advice before renting your property:

Depending on the property (size, location, basic amenities: elevator, air conditioning) you can increase its profitability by choosing high-end equipment (appliances, bedding). Moreover, decoration can help you stand out.

If you delegate the management, remember to choose a service provider that offers a complete service. This will allow you to attract more qualified profiles.

Long-Term Rental (Alquiler Larga Estancia)

This corresponds to Long-Term Rental. This type of lease allows the tenant to define your property as "vivienda habitual" or permanent residence. Authorities are increasingly implementing measures to facilitate access to housing and thus favor owners who choose this mode of operation. A few years ago, it was possible to deduct up to 50% of taxable income, today the cap reaches 60%. Contact your “Gestor” or tax advisor to evaluate your case.

The advantages? An interesting tax situation, generally less turnover (thus a lower vacancy rate), reduced maintenance costs.

The disadvantages? Agency fees are charged to the owner, interesting when your tenant stays several years but costly (and therefore less profitable) if turnover is significant. These contracts are valid for a duration of 5 years and are renewable, making your investment less liquid than with other modes of operation. Rents are controlled and indexed here.

Do you still not know which mode of operation to choose for your real estate property? Contact us for an initial meeting. Maen collaborates with several experts who will be able to guide you.

See you soon!