Taking the Pain out of Renting in Spain
Irresistible tax breaks and incentives put long term buy-to-lets in Spain at the top of the league.
Falling property prices, rising mortgage rates and market over-supply are not so promising signs for the Spanish property market, but for the overseas property investor looking to start or add to a buy-to-let portfolio, Spain means good news all round.
With one of Europe's highest percentages of empty properties and the continent's largest proportion of young people under 30 yet to fly the nest, Spain has massive market potential. Add to this a state rental agency with a long list of incentives, seriously tempting tax breaks and grants, becoming a Spanish landlord starts to look extremely attractive.
Letting property has traditionally been a thorny issue in Spain - tenants are entitled to stay in a property for a minimum of 5 years and eviction for non-payment has typically involved costly and lengthy legal processes with no guarantee of a result for the landlord. For countless Spanish property owners, renting out has been little short of a nightmare.
At the State Rental Agency (Sociedad Pública de Alquiler) they are only too aware of this and are determined to turn being a landlord into a dream occupation. A glance at their list of services shows that they certainly mean business. Landlords who commit their property to the Agency's books for a minimum of 5 years are eligible for grants of up to €6,000. The agency guarantees that your property will be returned to you in its original state once the tenancy finishes - and the Agency foots the bill for all this. If your tenant does not pay, the Agency will mediate on your behalf and provide legal assistance if necessary. With the creation of new courts to deal specifically with tenancy problems, interminable legal battles seem set to become a thing of the past.
With a buy-to-let property primarily an investment, tax breaks are always more than welcome and here the Spanish government has pulled out all the stops. If your tenant is under 35, all your rental earnings are exempt from income tax and if the tenant is older, you're still only liable for income tax on half your rental income. Associated expenses such as mortgage interest, essential repairs and improvements are all deductible from your final tax bill.
Attracting tenants to your property should not be a problem either - the Spanish government has introduced a series of measures designed to lure Spanish youngsters away from mamá and papá. For those between 22 and 30, the government contributes €210 a month to the rent, offers a loan of €600 for the deposit and pays €120 towards the cost of a bank guarantee. Not surprisingly, flying the nest is suddenly more than tempting and some 130,000 Spaniards have applied for the government scheme.
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