Should I rent my apartment short or long term?

If you have an unused apartment in a tourist zone, you may be tempted by the offer of lucretive short term lets into letting it as a tourism let. But do your sums first and decide whether you might be better off renting it for residential living….

It’s more expensive to let for the short term….

First off, don’t forget that the running costs of short term lets are higher than those for long term lets. Here are some examples to take into account:

  • Utilities – you have to pay the water, electric, internet, etc for short term lets, whereas if you let it long term the tenant assumes these costs
  • Cleaning costs after every let, as well as having to carry out the myriad small repairs to ensure the apartment is kept up to spec.
  • Advertising costs, or the commission you have to pay to letting agencies

More taxes, too

If you rent your property out for residential use, you can apply up to a 60% reduction in the declared taxable income on your annual IRPF personal income declaration. But for short term lets, you pay tax on the whole of the income.

For high rate taxpayers – those paying 45% on all income over €60,000 – this means that for every €1,000 of income you declare, you are paying €270 more on your IRPF (€450 – (€1,000 x(1-0.6)x45%).

Do your sums

Case study: Margaret has annual accumulated costs of €4,000 on her apartment (IBI, community, insurance). If she rents to a family for a long term let, she expects to be paid €12,000 a year.

But if she decides to let it for short term lets, then she expects to have additional running costs of €3,000 a year (utilities and cleaning). Let’s see how the numbers break down:

Long term let: An income of €8,000 a year (after the running costs). But Margaret can apply for a 60% reduction in this total taxeable rate as this is a residential let, meaning she only has to pay tax on €3,800. Assuming she is the highest rate tax payer (45%) then her theoretical after tax and cost profit is €6,724.

Short term let: In order to earn the same after tax and cost profit (€6,724) Margaret has to assume an additional €7,000 in fixed and running costs. She then has to assume a further €5,480 in tax due on the total.

So to earn the same profit as in the long term let scenario Margaret must have a minimum income of €19,204! This is equivalent to renting the property out for €370 a week, for every single week of the year.

Want to know more about operating a tourism rental in Andalusia?

Click here to download our free guide to operating a tourism rental in Andalusia.

Oh, and don’t forget to register your rental with the authorities – letting agencies and online property portals will shortly be sending information to the Tax Authority which will allow them to identify rental properties being rented without tax being paid on the income.

Maria Luisa

María Luisa Cervantes is a chartered accountant who graduated from the University of Granada in 2002. Founder of Cervantes Alarcón Consulting, she is an experienced accountant and financial advisor who is a member of the Almería guild of economists. With more than 15 years of experience in business administration and international trade, she is also a subject matter expert in the UK - Spanish bilateral agreements which cover the rights of expats to live, work and retire in Spain.