What’s this about today?
From the rental market in Altea
How is it going?
At least complicated
And not only I mean long-term rental … also the vacation.
And believe me, I have some experience.
The long term is complicated (the market, not for owners) because there are not many properties on offer, and everything that is below € 800 is rented in a minute, more than that it is difficult to rent.
In Altea Hills and Sierra de Altea there are people looking for rental villas but there is practically no offer, and the little that there is is excessively expensive (they are out of the market)
Right now I have very good customers waiting for something reasonable to come to market, and there isn’t.
As for the holiday market, this is reduced to June, July, August and some September and enough. The rest of the year is rented less, for shorter periods and for less money.
Why is this?
In my opinion it is due to several factors:
1.-) Descent of tourism. The tourists that the tour operators brought to Spain due to problems in other countries (Turkey, Tunisia) have already solved them and take them back there because they are more profitable.
2.-) The purchasing level of tourists has decreased, so they come in shorter periods.
3.-) There is much more offer of properties for vacation rental by owners who consider vacation rental more profitable than long-term rental.
There are plenty of homes for tourist rent and they are missing for long term
Now I will detail the profitability in the two options:
We will consider an investment of € 200,000 in an apartment near the sea with beautiful views of it:
In the long term, suppose we rent it at € 750 / month (€ 9,000 / year). It means a profitability of 4.5%. If we add the possible annual revaluation of 3-4%, it makes a profitability of 7.5-8.5% per year. Is there any bank giving that?
In vacation the same apartment can be rented in June at € 650 / week. July at € 750 / week and August at € 950 / week. Assuming a 1 week rental in June, 2 in July and 4 in August, we have a total of € 5,950. To that we must take away the management costs:
20% -40% management company (€ 1,190-2,380) + cleaning (80×7 = € 560) + electricity and water (+ – € 500) makes the owner clean between € 2,510 and € 3,700. This makes a profitability of between 1.25 and 1.85% per year, which adding to a possible revaluation would give between 4.2 and 5.85% per year, which is also not bad. If we are optimistic and add a few more weeks of rent per year, profitability can be close to 7%. What according to my point of view is phenomenal.
Advantages and disadvantages of both:
In the long term the advantage is that if we have a good tenant, we will be calm for many years. The disadvantage is if we have a bad one … you can imagine it. In addition to that we cannot dispose of our property to enjoy it. And water, electricity and garbage is paid by the tenant.
In vacation rental the advantage is that during periods of non-rental you can enjoy the apartment and the disadvantage in addition to being less profitable, is that it is much more complicated to manage (unless it is taken by a serious company)
Anyway, depending on our needs and tastes we can rent it in one way or another. What is clear is that the investment is highly profitable.
PS: the “economists” will say: “what smart, and the annual expenses of the property?” In an apartment of these characteristics Community, IBI and garbage add about € 2,000 / year, so to be more precise to the aforementioned profitability you have to lower it one point.
Do you know what I say? Profitability still seems very good.
If someone want to know more about, please let me know.
A hug to all