In this article we want to discuss the differences between tourist rent or rentals and long-term rentals (renting a permanent home).
Each of the modalities has its advantages and disadvantages and we are going to put them on the table so that you can choose your best option.
What is tourist renting?
Vacation rentals are short-term rentals, rentals for tourists or people who want to spend a short stay.
Normally this type of rental is usually promoted through websites such as booking or airbnb.
What is long-term renting?
Long-term rentals are focused on the use of the property as a place for tenants to live, and have their own regulations and laws compared to holiday rentals.
Requirements for tourist rent
The requirements to be able to carry out a tourist rental in compliance with the regulations vary according to the Autonomous Community and the locality where we want to do it.
Large cities tend to be more restrictive with this type of rental and the procedure to obtain the licence is more costly and time-consuming than in smaller municipalities.
Although the documentation and requirements differ from place to place, we will mention the most general requirements.
1. Obtain a tourist licence
A holiday licence is a permit or authorisation issued by local authorities that allows owners of houses or flats to rent out their properties for short periods of time, usually for tourist stays. These licences are common in places with a high demand for tourist rentals, such as resort towns or holiday areas.
The following documents are essential for obtaining a holiday licence for your property:
City council permit or Urban Development Compatibility Report or CCU
One of the necessary steps to obtain the tourist licence is to request a technical permit from the town hall.
In the Valencian Community, technically, it is called a report of urban development compatibility. In this report, the town council indicates whether the property is suitable for tourist housing.
Certificate of habitability or second occupancy license
It is important to understand that for a property to be a tourist property, it must first be a dwelling. The cédula de habitabilidad is the document that certifies that the property is a dwelling and therefore habitable.
Respect Prohibition of tourist rentals by the owners' association
An important aspect to take into account in tourist rentals is the possibility that the community of neighbours where your property is located may try to prohibit tourist activity in their community.
In this situation, the law is not entirely clear in some autonomous communities, as it does not establish a basis that clearly states whether the neighbours have this power or not.
In spite of this, we must take into account the statutes of the community in order to avoid problems with our community of neighbours.
Comply with Tourism Regulations
In Spain, tourism is not regulated at state level. It is the responsibility of the Autonomous Communities to regulate tourism. Municipalities can ultimately also regulate tourist rentals as long as they respect the regional regulations.
Some common rules in most regions of the country are:
- Tourist plate, which identifies your property as suitable and registered as a tourist property.
- Complaint forms: it is necessary to have them in order to comply with the regulations and offer guests a guarantee of comfort and safety.
- Report travellers to the police.
Requirements for long term rental
In Spain, the legislation regulating urban leasing is mainly found in Law 29/1994 of 24 November on Urban Leases (LAU).
https://www.boe.es/buscar/act.php?id=BOE-A-1994-26003 .
Some key aspects for landlords are:
Contrato de Arrendamiento
It is essential to draw up a detailed lease that clearly sets out the terms and conditions of the tenancy.
Deposit
The tenant must provide the landlord with a deposit equivalent to one month’s rent in the case of a dwelling.
Rent
The parties are free to agree on the amount of the rent. In contracts with a duration of more than five years, it is possible to agree to update the rent in accordance with the evolution of the Competitiveness Guarantee Index (IGC) published by the National Statistics Institute (Instituto Nacional de Estadística).
Manteinance and repairs
Landlords are responsible for maintaining the property in habitable condition and making necessary repairs.
Landlord's insurance
Some homeowners choose to obtain homeowner’s insurance to protect against financial loss due to property damage or liability.
Taxation and taxes on tourist accomodation rentals
It is crucial to seek specific professional advice in order to be up to date with the taxation and taxes applied to this type of rental. This is the way to ensure that you comply with all tax requirements and avoid problems with the tax authorities.
In general, income from tourist rentals is considered as income from real estate capital.
It is also worth mentioning that in the simplest tourist rentals, there is no VAT and it is not necessary to be self-employed. But it must be taxed by ITP.
Traditional Leasing Taxation
The rental of a real estate property constitutes income that must be included in the personal income tax return (IRPF), either as income from real estate capital or as income from economic activity.
Management of tourist rental
To carry out a tourist rental offering a good experience to the tenants, it is necessary to carry out an active and constant management of your property.
You have the option of delegating this management to third parties or doing it on your own.
You will have to bear in mind that in order to offer an attractive rental the property has to be in perfect condition. Let’s break down the most important issues to take into account in order to manage your holiday rental in the best way.
- Cleaning the property before the arrival of new tenants.
- Change of bed linen and disposable items.
- Advertising and promotion of the property to make your offer visible to potential clients.
- Communication of visitors to the competent authorities.
- Visitor communication
- Check in/Check out.
- Legal advice.
- Start-up, refurbishment, furnishing…
Profitability of tourist accomodation VS Normal renting
Prices
Long-term rentals are generally set on a monthly basis. Monthly prices are usually significantly lower per night compared to tourist rentals.
Long-term rental contracts may offer greater stability in income, but prices do not adjust as easily to seasonal fluctuations or demand. In other words, they are not flexible.
In contrast, tourist rental prices are often set on a per night basis. In popular tourist areas, especially during peak seasons, prices can be relatively high.
Owners can adjust prices according to market demand and season, which can result in higher incomes during periods of higher demand.
Income
Tourist accommodation usually generates income per night, and in popular tourist locations, this income can be significantly higher compared to a standard monthly rental. However, there are also periods of low demand.
On the other hand, traditional rentals provide a more stable and predictable income.
Seasonability
Tourist rental prices can vary significantly depending on high and low season, as well as local events that attract more visitors.
Regular rentals can have price stability throughout the year, with less dependence on seasonal fluctuations.
Control of the property
It is important to consider how much control you have over your property depending on the type of lease you take.
In a long-term tenancy you lose control of your property during the 5 years of the contract. If you want to make visits to your property you will have to consult with the tenants beforehand to ask for their consent.
If the owner needs the property, he/she can terminate the contract after a minimum period of 12 months, provided that this is expressly agreed in the contract.
In the case of holiday rentals you have greater availability of your property as the tenants’ stays are short and usually do not last more than two weeks. This allows you to get a good profitability at the same time that you can dispose of your property.
In this case you do not lose control of your property and you can visit the property with prior notice.
Buying holyday homes
Properties with a tourist licence or suitable for tourist rental are more expensive to buy on the market. Restrictions on holiday rentals are increasing over the years. Therefore, finding a property suitable for this purpose is quite expensive. Especially in big cities.
VERY IMPORTANT, before purchasing, it is advisable to consult experts to ensure that you are complying with all regulations and maximising the potential of your investment.
Having a tourist licence increases the value of your home
In the big cities, Madrid, Barcelona, Valencia, Alicante, it is very difficult to find a property suitable for tourist rentals. The city councils are strangling the tourist rental.
That is to say, if you have a property with a tourist licence in a large tourist city, the market value for its sale can go up to 25%.
The future of rents
There is a clear tendency to increasingly restrict tourist rentals and to regulate long term rentals to a greater extent, trying to regulate prices.
Vacation rentals boomed more than ten years ago with the advent of private home rental platforms such as Booking or Airbnb.
However, the global health crisis of 2020 forced landlords to change their priorities from short term rentals to long term rentals, something that still continues today.
Due to a huge increase in demand, rental prices in Spain are steadily rising. Since 2015, rental prices in Spain have increased by 41%.
Other factors that are currently directly affecting long-term rental supply and demand are the recovery of the economy and employment; and secondly, due to accelerating inflation, the scarcity of public housing.
In addition, governments point to tourist renting as one of the main problems of long-term rental inflation.
In conclusion, there is more and more state interventionism in rentals and even stifling tourist rentals.
