Buy to let Spain: the Pros and Cons

Should you pursue a buy to let opportunity in Spain? What is the likely return on investment? Can you get a mortgage? All the details you need here.
Article Published: 12 May, 2023, Updated: 22 Jul, 2023 under Property Purchase

When an investor is buying property to let in the UK or Ireland, often their objective is to invest (with the help of rental income) over the long term in a capital asset, which, in the recent past, has risen in value year-on-year, such that it provides a profit and, perhaps, a pension for the investor.

While this is entirely possible in Spain, and indeed property prices have increased dramatically in recent times, the elevated transaction costs don't make buying Spanish property as attractive as a property investment in other locations, such as the investor's country of origin.

Typically, the objectives of investing in a buy to let in Spain are slightly different.

1. Why would you want to buy to let in spain?

If you are interested in buying Spanish property, most likely you are thinking about having a holiday home in Spain, and even a place you could live if you should decide on retirement in Spain.

Very possibly you have already done this in the UK or Ireland and are considering applying the same strategy in Spain, albeit not so much for the capital gain, as the opportunity to finance a holiday home or somewhere to live when you retire in Spain.

Assuming the investor's motives for buying property in Spain to rent out are to own a property for occasional or future use in Spain, then what considerations should the investor take into account?

2. Financial considerations

Although you may be buying property in Spain without the sole objective of profit, you would no doubt prefer to avoid any financial loss. So, what do you need to consider when analysing the financial viability of a property purchase in Spain?

Generally, the profitability that can be expected in Spain for renting a property is between 1% and 10% of EBITDA (earnings before interest, tax, depreciation and amortization).

Of course, these are extremes that are difficult to achieve, and it is normal that the yield (rental income divided by property value) is between 3% and 7%.

If you are buying property in Barcelona, for example in the Paseo de Gracia, it is possible that the profitability is very low, perhaps only 2%, but nevertheless depending on your point of view this may be a more interesting investment than buying a flat in a suburb of a large city that gives a return of 8%.

3. The local property market

Consideration must also be given to potential variations in how the rental market functions in different areas.

If we take the example again of renting-out an apartment in Barcelona's Paseo de Gracia, this is likely to attract high value tenants, which means longer rental contracts, more solvency, that is, with fewer probabilities of non-payment. Consequently, the property will spend less time lying empty between one tenant and the next, and you can increase the rent more easily. 

The investment itself is also more interesting because in case of economic recession, the properties in the city centre are the last to go down in price, but they are the first to go up in price when there is an economic recovery, and to sell it you will always have interested buyers.

On the contrary, for a property on the periphery of a city, the cost of acquisition will be cheaper, but the tenants will not always be solvent, which implies a greater risk of having to go through the eviction process in Spain.  This will obviously have an impact on the bottom line.

Below you will find a summary of the main costs of buying property in Spain:

4. Taxes and costs in spain

ITP/IVA: Known as stamp-duty in the UK and Ireland, this is the main government property transfer tax. ITP (impuesto transmisiones patrimoniales) is payable on resale properties, while IVA (VAT) is payable on new-build properties.

The tax ranges from 6.5% ITP in the Canary Islands to 13% of the purchase price for properties valued over €2m in the Balearic islands. IVA is 7% in the Canary Islands currently, and 10% on mainland Spain and the Balearic Islands.


Land registry fees: the fees payable to register the purchase of a property in Spain with the land registry vary according to the value of the property, subject to a minimum fee of €24 and a maximum of €2,181. It is extremely important that your title is legally registered on the registry:

Value of Property Land Registry Fee
Between €6,010.13 and €30,050.61 €24.04 plus an additional €1.75 for every €1,000 of value
Between €30,050.62 and €60,101.21 €1.25 additional for every €1,000
Between €60,101.22 and €150,253.03 €0.75 additional for every €1,000
Between €150,253.04 and €601,012.10 €0.30 additional for every €1,000
€601,012.10 and above €0.20 additional for every €1,000


Notary fees: there is some latitude here, but notaries are semi-official, and their fee levels are set largely by the government. For presiding over the signing of the property deeds by the buyer and seller, a notary will normally charge anywhere between 0.2% and 0.5%

Professional legal advice: normally the fee will range from 0.5% for higher value homes to 1% or more for lower value properties. Some lawyers will charge a minimum fixed fee and otherwise a percentage of the property value.

Estate agents fees: for the purchase of the property, estate agents in Spain usually agree a fee with the seller of the property, so this is not a cost for the buyer. However, if the plan is to rent out the property - either as a holiday rental or long-term tenant, then an estate agent will be needed to manage the rentals (see below, types of estate agents).

5. Buying property in spain via a limited company

Taxes when buying property in Spain are the same for individuals and Spanish companies, and they normally represent approximately 12% of the value of the property.

  • Capital gains tax: typically, paid by the seller to the central government
  • Government Transfer tax: varies per region, between 7% - 12% of the value of the property
  • Notary fees
  • Lawyer's fees
  • Land Registry fees.

If buying property via a corporate entity, you will also need to consider the following factors:

  1. Non-resident individuals or companies that are owners of a property in Spain that is not offered for rent to third parties (e.g. holiday makers), must pay a yearly “non resident” tax to the Spanish Tax authorities which is set as a percentage of the rateable value of the said property. Meanwhile, Spanish Limited Companies that accrue a property pay corporation tax that varies between 0 and 30% of the profits, depending on how high they are. In both cases, there are other annual taxes, ie local tax for having a property in Spain -IBI- etc.
  2. Spanish companies are obliged to keep some records, such as shareholder’s registry, balance sheets, inventories, daily journals and to deposit annual reports and balances in the Spanish Mercantile Registry. You will therefore most likely need to budget for this to be managed on your behalf.
  3. Foreign companies need to name a tax representative in Spain and pay yearly tax representation.

In summary:

  • Purchasing a property in the name of a foreign company is a good choice if this company operates in Spain -ie, for renting or selling properties here, etc.- but not if the only reason for this is paying lower inheritance taxes in the future, since the Spanish law has been changed as a result of the recent European Court of Justice decision.
  • Purchasing the property in the name of a Spanish company for mere enjoyment involves the payment of annual taxes and reporting obligations. This will almost certainly require that the purchaser retains the services of a tax specialist to manage this responsibility, thereby incurring additional fees.

6. Buy to let spain: mortgage options

In general, it is fair to say that Spain's mortgage sector is somewhat less developed than the UK, in the sense that it is perhaps more conservative in it's approach.

A buy to let mortgage in Spain does not, per se exist, and are likely to treat this type of loan as an investment mortgage. Investment mortgages would normally offer a lower loan to value ration, of around 50% - 60% of the value of the purchase price (or valuation if lower).

It is therefore a good idea to discuss the matter with an experienced mortgage broker who can guide you on the most appropriate mortgage in Spain for your specific circumstances.

7. Income tax implications for landlords

Regardless of whether you actually rent-out the property, in Spain, non-resident property owners must pay the non-resident income tax. This is effectively an income tax on 'imputed' rental income from the property.

If you are resident in the UK, then as you are not resident in the European Union, you will be taxed at a higher rate than residents of other EU countries.

The non-resident income tax is somewhat complex, but effectively each property is assigned a 'catastral value' (by the Tax Authorities) and non-EU residents must pay 24% of 2.2% of the catastral value (or potentially 1.1%, if the catastral value has been calculated in the last 10 years).

EU-residents pay 19% of the same portion of the catastral value.

For any time that the property is rented-out, the owner must pay taxes on the income generated (instead of the non-resident income tax). Here the difference between EU residents and non-residents is more pronounced because, apart from the fact that non-EU residents pay a higher rate of tax, they are also unable to deduct expenses in the management of the property.

So, while EU residents pay 19% of the net rental income, (after deducting expenses including 3% of the value of the property), non-EU residents must pay 24% of the gross rental income.

If you are planning to continue living permanently in your country of origin and only rent out the property in Spain, you will be subject to non-resident property tax.

It is always a good idea to ensure that you have help from a professional tax advisor, to help navigate the Spanish tax system, however this is also an additional cost.

For those who are tax-resident in Spain, while there is no longer a mortgage tax allowance, you are permitted to deduct 60% of rental income before tax is applied.

Bear in mind that a property owner in Spain is obliged to pay taxes relating to Council Tax (IBI),

The legal considerations when buying a Spanish property to let out encompasses both the purchase of the property itself and the legal relationship with the tenants, and indeed with neighbours and community of owners in an urbanisation, especially when dealing with holiday lets.

Of course, when buying property abroad,  if you seek legal advice from an experienced lawyer who is legally registered and regulated by the local bar association, you will avoid many of the problems highlighted below.

spanish let

9. Holiday rental vs long term rental

It is important to distinguish between short term rentals and long-term lettings. Effectively, a holiday-letting does not confer on the guest staying in the property any form of tenant's rights.

This will be clear from the nature of the rental transaction and any contract signed by the two parties.

This is a much preferrable situation for the property owner, since it avoids potentially grave and costly legal conflicts arising.

10. Tourist licences

Apart from all of the usual checks, to make sure the building permits are in order, any swimming pools or extensions to the property have the correct licences, that there are outstanding debts that the previous owner failed to pay etc., if a person is buying a property to rent-out, the lawyer will be particularly concerned to make sure that it is possible to obtain a tourist license for the property.

For example, it is effectively impossible to obtain a new tourist license for properties in Barcelona and the Balearic Islands, as a result of regional government policies in these areas. Any properties that already have a licence issued, tend to have a much higher purchase price.

It is all well and good to buy a property in an area that regularly receives a tourist influx, but if you don't have a tourist license, you could easily be subject to huge fines.

11. Spanish and local legislation relating to tourist lets

Up until 2010 holiday lettings came under the same legislation as lettings in general and were regulated by the Ley Arrendamientos Urbanos (Urban Leasing Act) though this was derogated as a result of the introduction of the European Directive on Services and as a result legal limbo followed.

However, this was changed by law 4 of 2013, which excludes from it's application private holiday lettings and instead makes such lettings subject to the laws adopted by the regional autonomous communities to regulate tourism accommodation in their areas.

As a result, whereas formerly it would have been enough to have a legally built property with the construction and habitability licenses in place, now, depending on the regional laws, the accommodation may well be subject to any number of regulations such as health and safety, disabled access etc by way of a requirement to apply for a tourism accommodation license.

Accordingly it is necessary for anyone considering letting-out their property for holiday lets (as opposed to long-term lets) that they follow the local tourism regulations with regard to registering their property for such purposes. These vary according to the regional laws applicable, but as an example, in Cataluña, any property owner who wishes to rent-out the property for the purpose of holiday lets must:

  • Inform the town hall of their intention to let out the property to holiday makers
  • Registration of the property on the relevant tourism registry,
  • Retain the services of a company for the purposes of property maintenance,
  • Make the property available for public inspection,
  • Provision of complaints forms,
  • Maintain an updated list of occupants to provide the police with as necessary.

Failure to comply with these requirements can lead (of course) to the imposition of financial penalties. In addition anyone considering letting their property would need to obtain an energy efficiency certificate, further driving-up the costs of this commercial enterprise.

When problems with a tenant arise, it can be expensive for the property owners, and it would be fair to say that the current Socialist government, supported by their even more left-wing partners have tightened the laws in relation to tenant's rights in Spain, to provide increased rights to those living permanently in rented accommodation.

However, probably the biggest fear of prospective landlords must be the proliferation of 'okupados' or squatters who take over a property and then, using the delays inherent in the Spanish judicial system, employ all manner of measures to avoid leaving the property.

That said, the properties most typically at risk of such squatters tend to be those properties empty for long periods of time and especially entire blocks of apartments bought over by banks and foreign venture funds as long-term investments.

In any case, vigilant neighbours who can warn you of any untoward activity in your property and/or a personal security system with a camera that can alert you to unexpected movement inside your property would be most useful in avoiding such problems. You have 48 hours to alert the police to remove such squatters before you will have much more problems having them removed.

Tenants have a right to at least 5 years in a property under a long-term leases (at least 1 year, though payment of rent on a monthly basis could give rise to an implied tenancy agreement). This may be extended to 7 years under current proposals.

Until the end of the lease, the terms of the rental contract cannot be changed without mutual agreement. The rent may be increased only by the state-authorised rate of inflation. Recently, the Spanish government has imposed a 2% maximum, and there may be special conditions applied to urban areas where the government considers rental levels to be too high, such the major cities and some popular islands, such as Mallorca.

13. Eviction proceedings

While common among those buying property to rent out in Spain may not want to ponder on negative outcomes, should a tenant fail to pay their rent, or breach some other term of the lease, what options does the landlord have?

While new laws have been promulgated to speed-up the process, unfortunately the long queue of cases to be heard by the Spanish courts causes long delays.

The first step when you are faced with a non-paying tenant is to have a lawyer send a formal letter of demand - to quit the property or pay the outstanding rent. This is usually done by way of a 'burofax' which is a letter registered formally with the Spanish Post Office service, and which provides proof that it was sent.

While this is not strictly necessary under the law, it is widely done and judges tend to accept it as evidence that the landlord has followed the rules and attempted to resolve the matter appropriately. Also, it gives the tenant the opportunity to leave the property immediately (for example, on the basis they will not be pursued for outstanding debts). This could avoid lengthy legal proceedings and the costs involved.

Should the tenant not make payment by the established date, the landlord can begin legal proceedings in court to have the tenant evicted. When the court provides a date for the proceedings, both parties are informed. If the tenant makes payment at this time, the proceedings are stayed.

If the proceedings go ahead, upon confirmation by the Court that the eviction should proceed, the tenant is formally notified of a date whereupon the bailiffs will proceed to eject the tenant from the property, as required.

As stated previously, there have been a great deal of changes in this area of the law, reflecting general dissatisfaction at the time it takes to remove non-paying tenants, as against the most recent Socialist government seeking to extend the rights of tenants. We provide more details of this area of the law in our article: evictions in Spain.

buying property in spain to rent out

14. Personal considerations

Apart from the legal and financial aspects of buying to let a property in Spain, there are also a number of personal considerations: will you manage the letting of the property yourself, or let an agency manage it? Where will you decide to buy in Spain? What type of property?

15. Types of real estate agencies

When renting a property in Spain you will need the services of a real estate agent, and depending on your objectives, you will need one type of agency or another. In fact there are several types of real estate agencies, but we will speak about the 4 most common:

  1. Single service agency: This type of agency finds you a long term tenant, (5 years or more), does all the paperwork (places ads in webs, shows it to interested parties, makes the contract, registers it...) and that’s it. They charge a commission to the tenant of about 1.5 months. This would be an interesting option for someone who lives close to the property and will manage the day-to-day of the rental themselves, such as rent collection, possible repairs to the property, communication with the tenant... etc.
  2. Long-term rental agency: Another type of agency would be one that not only finds the tenant and draws up the contract, but also manages the day-to-day running in exchange for a percentage of the rent of around 4%+VAT. This is the preferred option for those who buy a property without the intention of living in it in the short term.
  3. Temporary rental agency: This is the perfect agency for those who want to alternate the personal use of the property with renting it, that is, who want to enjoy the property one season and not another. This modality is very common in cities of the Mediterranean coast like Barcelona, Valencia, Alicante, Málaga... etc. With this option you can enjoy the house for example during 3–6 months and the rest of the year it is rented. Normally, the rental periods are not less than 3 months.
  4. Tourist rental agency: The tourist rental, less than one month, is highly regulated in big cities like Barcelona or Madrid, where a tourist license granted by the city council is required, and for several years the city councils have not issued new licenses, so if you want this modality, it is possible that you will have a higher profitability than usual, but when you buy you will have to pay an extra price for the licence. They cannot be bought separately, that is, if you want to carry out tourist lettings, you must buy a property that already has a tourist licence already granted.

An agency that manages tourist apartments, will charge you between 15% and 25% of the turnover, from which you must discount other expenses like the utilities of the tenants, tourist rates, cleaning, etc. 

However, there are also some agencies that offer a type of fixed income per month, ie, they pay you a fixed amount each month and are dedicated to renting the property and its benefit will be the excess obtained from the amount you pay.

16. The spanish property market and where to buy property in spain

Like any other country, Spain has a collection of individual markets rather than a single property market.

While it is possible to find long-term tenants more or less anywhere in Spain, the greatest demand would be in the larger towns and cities, where more and more Spanish people work and the demand for accommodation is highest.

On the other hand if you are seeking a holiday home that can also be used as a rental property by tourists, you are going to be concentrating your search for a property in Spain around the costal areas and the islands.

We provide more information on this in our article on the best places to buy in Spain.

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