Over the last few months we have had more and more clients deciding to rent out their Valencia Property long term rather than using portals such as Airbnb. You can see some of the reasons why the Airbnb model is failing in the city here. Long term rentals have become more scarce over the last few years as everybody moved into short term tourist rentals and this has pushed prices up for long term rentals due to the dearth of properties on the supply side.
The good news for you if you want to rent out your Valencia property on a long term basis is that the preparation for renting out the property is easy if it has already been rented out short term previously, it is likely that everything is in place. However, if this is the first time you have thought of renting out your Valencia Property then you need to consider various issues before putting it on the market. In this article we are looking at what you need to consider if renting out your Valencia Property remotely which is the case for most of our clients who do not live here.
Price. The first thing to consider obviously is price. If you want to maximise your rental income then your monthly price should be higher of course. However, you need to be careful to not price yourself out of the market by putting the price too high or out of reach of your target market. Obviously therefore you need to identify your target market before buying your Valencia Property. If you are looking for teachers for example then you shouldn’t be charging over 600 Euros per month really as teacher wages tend to be around 1500-1800 Euros per month and the rule of thumb of 30-35% of income maximum should be applied with tenants in the same way as banks apply it for mortgages.
However it is difficult to find anything in the city of Valencia itself around this price so pricing it there may give you too many potential tenants. You then choose the tenant by asking for papers to look at including income, work contracts or references. It is difficult to get bank guarantees from potential tenants now so the next issue is fundamental if looking to have Spanish tenants.
Rental Income Insurance. Insurance against non payment of rent is important if you are going to rent out to Spanish clients. There are companies that allow you to pay an annual insurance against non payment of rental. They require the potential tenants to supply their paperwork and fill in a form to apply for approval. If approved then the landlord can pay an annual insurance to cover non payment by the tenant and also the eviction process of a recurring non paying tenant. The cost for this insurance is surprisingly low. In the cases where our clients have taken out this insurance the cost has been around a half of one month’s rent for the annual coverage.
Bear in mind one thing though. If you are targetting non Spanish nationals to rent; Erasmus students, teaching professionals in the international schools, expat rentals etc… then you cannot apply for rental income insurance. The background checks cannot be done by the companies so they will not insure.
Our experience over the years tells us that foreign tenants are much more likely to pay though as the last thing they want is a legal problem in Spain.
Furnished/Unfurnished. Some people have their own furniture and white goods so want their property to be unfurnished. This is especially true of Spanish nationals moving between rental properties but is hardly ever the case with foreign clients so if that is a market you are looking at then furnished is usually better. The clients of Valencia Property usually look for furnished rentals so we tend to concentrate on those types of rentals to offer to our clients. There is also the intermediary stage of semi furnished with the kitchen completely furnished with white goods and being fully equipped and different levels of basic furnishings in the property because some tenants bring certain things but haven’t got everything. If your property is furnished or semi furnished then you should have an inventory of what is there. We have found that a photo inventory is better than a simple list as it shows the state of the furniture on moving in and it can be compared with it on moving out. Obviously you have to allow for a bit of wear and tear over the years but you should be able to spot any malicious damage.
Responsibilities. Speaking of wear and tear it should be clear in the contract who is responsible for what and at this point, a word to the wise, as a tenant make sure that it is clear that the landlord is responsible for white goods etc… in the contract as we have seen cases where the tenant has been asked to replace fridges, tv etc… supplied within the contract even when it is not their fault that the article no longer works. As a landlord be responsible too. If it is your responsibility make sure to act on any defects or incidents immediately so as to maintain good faith of the tenant.
Contract Type. Long term rental contracts in Spain traditionally run for a year with automatic extension for up to three years more on completion. The change in the law at the start of 2019 means that tenants can now break the contract without penalty after a six month period giving a month’s notice and sufficient access for the landlord to find another tenant in that period of time. Therefore as a tenant don’t be afraid of signing a long term contract now as you can get out of it if required. Also as a landlord this means you cannot prosecute the tenant for incompletion of a contract for the whole year’s payment. The new system is much fairer as there may be genuine reasons why the tenant wants to or needs to leave. Therefore as a landlord it is important that you advertise the property quickly once you have notification of a tenant leaving.
Some landlords have put in place medium term, six month rolling contracts to avoid this issue but that doesn’t give your tenant any security of tenancy so you may find there are fewer potential tenants with that type of contract. Others have opted for fixed term rental contracts for periods of under a year. This is often the case when taking on student rentals for example from September to June.
Facilities and what services are included?. Will you be supplying a TV, will internet be in place, will you include water, electric and gas in the tenancy agreement and price? All of these consideration are important in pricing your rental of course but also in attracting people to rent in the first place. Foreign tenants often like all inclusive deals so they don’t have to think about finding an internet provider and signing up to a service for a minimum term of a year when they may move before that time. Therefore it is often convenient to have internet installation included in the price.
Equally, it is convenient to change the electric, water and gas supply bank accounts from the landlord to the tenant but this can create problems further down the line in the case of non payment and transfer back to the owner so many landlords keep the contracts in their name and include the services in the price. The main issues here are if you get a tenant who abuses the air conditioning for example leaving a huge electric bill or if you change the contracts over to the tenant and they don’t pay meaning the services get cut off. You can avoid the problem by having a maximum usage clause in any contract which you can base on previous occupancy and costs for example. This is especially important for electricity but gas and water are difficult to rack up huge bills over and above the norm. Anything over a certain amount will be charged to the tenant. This amount needs to be reasonable to allow for spikes in usage and take into consideration low usage when absent from the property. It is usually a negotiation with the tenant.
Photos. In order to attract more potential tenants good photos are essential and funnily enough good photos are extremely rare. By putting a bit of effort into staging and photography you can make your rental much more attractive to a potential buyer. This is a service we supply at Valencia Property so if you are looking for listing your rental property we can help, just contact us by mail for more details.
Keyholding Service. Most of our landlords are not living in Valencia. They buy a property and then rent it out when they leave the city or immediately after purchase. If this is the case then you need a keyholding service or a full rental service. The keyholding service can be for something as simple as being the first point of contact for any issues for the tenant and picking up post. You may also want to take this all the way up to serviced apartments depending on your rental contract. (It is rare to have a serviced apartment in long term rentals) You may wish for a monthly cleaning service to go into the property for example to keep an eye on it. You may want a monthly check on the state of the property to make sure everything is working and there are no issues for the tenant. Whatever you decide it should be stipulated in the contract you sign with the tenant. The price you pay for this will vary according to the services provided and the number of visits expected to be required. A simple keyholding service may be from 50 Euros per month as a first responder with added costs if work is required, eg, arranging a plumber to clear some blocked drains or a leak. Obviously the cost of the plumber would be the landlord’s in these cases too.
Taxes. If you are renting out a property in Spain then you have income in the country and are required to pay tax on that income. Every year therefore it is important to do a tax declaration of income and expenses of your rental. Your conveyancing lawyer should be able to recommend a tax advisor for this. Equally you may want to declare it yourself through a Gestor. Whatever you decide it is a simple process. You may be liable for tax on the income or not depending on your Spanish income from other sources. If your income is under a certain level you may not be obliged to make a declaration.
Deposit Return. At the end of any contract you are obliged to return the deposit minus any agreed amounts for outstanding bills, damage etc… The number of people who have been scammed for their deposits by landlords claiming damage that doesn’t exist, costs for reasonable wear and tear that are not responsibility of the tenant etc… are ridiculous.
Don’t be that landlord.
Return the deposit as is correct at the end of a successful tenancy. This is especially important if you have multiple properties as word quickly spreads that you are honourable and you will get more potential tenants. Remember that the tenant is moving onto another apartment usually and will need that money for their deposit on another flat or to furnish or decorate their own home after they manage to buy one. Don’t make their move more stressful than it already is.
So there you have it, a basic guide to renting out your Valencia Property. If you have any questions then shoot them over to us and we can append them to the article for others to know the answer too. The rental market in Valencia is a good one as rental returns are higher but remember too, the best tenants are not always those who pay the most, they are the ones who will treat the place as their own, look after it, keep it well ordered and up to date and leave it as they came in. If you have that type of tenant it is worth accepting a lower price for that peace of mind and security. Luckily, the clients we get at Valencia Property tend to be that type of tenant. Ask us if you want us to help you find a reliable tenant.
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