Is it worth buying a holiday lodge to rent out?
Disadvantages of owning a house on the beach
How much does it cost to have an apartment on the beach? Maybe in these times of quarantine, uncertainty we have considered that it may be a better idea to use the money in a house and to have the vacations solved. How much will it cost us?
There are two costs associated with this, on the one hand we would have the opportunity cost of having this money invested in something more profitable. For example, the historical average of the S&P500 between 1958 and 2018 was an 8% return, which probably a beach apartment is not going to give us the same return. That is, conservatively assuming a 6% return net of commissions, for a 200,000 euro property, we are giving up an annual return of 12,000 euros. Half of this amount is usually enough for a good vacation for a family. That is to say, if we want to be FIRE, surely this is not our best option.
If we live in places like Zaragoza or Lérida we have the coast of Tarragona at a short distance by car or the inhabitants of Seville have the coast of Huelva at a reasonable distance by car that allows them to make use of a vacation home every weekend of the summer if they wish.
Investing in vacation homes
Calculations made by CincoDías with data provided by the real estate portals Idealista and Rentalia show that, on average, it is 65.5% more expensive to buy a vacation home than to rent that home in the same location during the month of August.
For the study, they have taken as an example the prices of holiday rentals and the cost of buying a typical home (two bedrooms and 70 square meters) in four locations on the Mediterranean coast, representative of where the largest number of second homes are concentrated: Benalmadena (Malaga), Benidorm (Alicante), Sitges (Barcelona) and La Manga (Murcia).
Of course, the same is not true when it comes to buying a property. The cost of taxes has been added to the price per square meter in the same locations. These include VAT if it is a newly built property, which would be taxed at the reduced rate of 10%, or the transfer tax (ITP), whose average rate is 8%, the stamp duty if the house is acquired by mortgage plus the costs or fees of notaries and registrars.
Where to buy a house on the beach
If you have a house for rent, surely you will be interested in knowing the taxation of the apartments on the beach, the rural houses or the apartments that are rented to tourists for seasons. Their inclusion in the Income Tax Return has several points of interest that it is necessary to know in order to do it correctly.
It is very important to clarify that not all the advantages of renting for permanent residence apply to these leases and that complying with the Tax Authorities does not exempt from complying with the regulations of the Autonomous Community, which is the one that governs the necessary requirements to be able to rent a house for vacation purposes. It is necessary to know that each Autonomous Community has its own regulations to be able to rent a house and it is convenient to know them before renting a vacation home in order not to face possible sanctions.
Once known that we are going to deal with the taxation of holiday homes without hotel services, it is necessary to know that the days in which the house is rented must appear in the Income Tax Return as “yields of the real estate capital”.
Investing in homes for rent
Nowadays you can find properties available to stay in virtually anywhere in the world and at a price that can be much lower than any hotel room or hostel.
The possibility of making easy money has prompted many people to even consider buying rental properties on Airbnb as an investment strategy. Today we will analyze the pros and cons of carrying out a real estate investment for use through this popular platform.
However, it’s not all plain sailing, you should also consider that Airbnb charges a 3% commission for finding you a guest, in addition to the taxes that will be withheld depending on where you live. You should also keep in mind that, in addition to the normal maintenance of the property, you will be responsible for the payment of all the services that you will have to offer to the client, such as electricity, cable TV, Internet and cleaning.
Another factor to take into account are the tenants; generally, in a traditional rental contract, a previous verification is made to know who you are renting to, however, in Airbnb the reality is that it is very complicated to know anything about the person who will be coming to your house.