Property management in Spain

Managing a property in Spain can come with some costs such as taxes and several logistical challenges, especially if you won’t be in it all year round. You will need to consider how you are going to manage the property once you have completed on your property purchase.

Tax obligations for property owners

Property owners must pay annual property tax, known as Impuesto sobre Bienes Inmuebles (IBI) in Spain. The annual tax rate varies between 0.4% and 1.1% across municipalities and is based on your property’s cadastral value, generally around a third less than the market value.

If you are an EU or EEA (European Economic Area) citizen then your property management fees are tax deductible. If you live outside the EEA or are not an EU citizen, you aren’t able to benefit from these deductions.

Insurance requirements for property owners

Insurance is a vital part of property management. You’ll need to have suitable property insurance to protect your property and financial investment.

This includes building insurance to cover the property itself, as well as liability insurance to protect you from potential legal claims.

Additional home insurance may also be a sensible investment, especially if your are renting your property out.

Logistical challenges to be aware of

If you are relocating or emigrating to Spain full time, managing your property will be slightly different to managing a property in your own country. Some issues to consider are:

• The physical impact on your property caused by longer, warmer summers and the greater risk of forest fires if you own land. Essentially, this is a matter of common sense and you should follow local guidelines.
• Non-resident owners of a holiday home that is left empty for long periods may be surprised at how much a property deteriorates through lack of regular maintenance. Setting up a regular maintenance programme – and budgeting for it – is essential.
• If you’ve invested in a buy-to-let, (“fly-to-lets” as they are commonly nicknamed when overseas), then employing a property management company is likely to be essential. If market conditions allow, you can try to include the budget for that in the rental price. If you rent the property out via AirBnb or similar, don’t forget to include a cleaning charge to cover these costs.

Self-managing your property

The first option is to just do it yourself. For those with a holiday home, the downside is having a list of repair jobs to do each time you visit your property for a relaxing break.

For those operating a fly-to-let, this might be possible for a long-term rental, but will be problematic for short-term holiday lets.

Either way, the key to successful property management is to be businesslike about it.

The 1% rule

A good rule of thumb is to spend 1% of the property value each year on maintenance. So, budget for at least €2,500 per year on a €250,000 property.

You will find various online planners for scheduling regular maintenance, but it is a job that anyone can do. Simply list the items that might need doing and create a checklist for doing them, whether that is repainting the exterior or replacing the swimming pool pump.

Some jobs you can be proactive about and maintain as you go along. Others will simply need fixing when they fail. Gather contact details and keep them handy for when that happens, including plumber, electrician and others. Ask neighbours for their recommendations.

Community fees and repairs

Homeowners in Spain do not suffer under the UK’s invidious leasehold system, where your freeholder can suddenly lump you with a huge bill for a new roof or other capital expenditure.

However, apartment owners should bear in mind that such expenditure still needs funding. This is where community fees come in. Community fees in Spain are paid by owners of properties in shared buildings such as apartments and townhouses. They cover the cost of the upkeep and maintenance of any communal spaces around your property, including that sparkling swimming pool, the access road, lighting and roofs, plus insurance.

Typical community charges in Spain are €50 to €250 per month but can be much higher for more luxurious properties. Levels are set by the community itself, including a reserve fund, but are protected under Spanish law from being unreasonably high.

Not paying your community fees will incur financial penalties and, in extreme cases, the selling off of your property.

Employing a property management company

If you have a private villa, avoid being welcomed by a green swimming pool and musty, unaired ambience every time you arrive by employing a property management company.

Even for those not renting out their property there are great advantages to this. At a basic level they can air the beds, clean the pool and buy some fresh milk for your arrival. Traditionally, key holding and simple property maintenance has been a popular job among the retired expat community. A note in a local shop window or expat news-sheet will get plenty of applicants.

There is the option of having a concierge type service that will also keep an eye on the property while empty, pay utility bills and keep the garden in order (indeed, keep it alive in the heat of a Spanish summer).

It’s worth noting that managing your utilities, bills, maintenance and repairs will likely be in Spanish, so if you don’t have great command over the language, help will be invaluable.

Property management for rentals

For those renting out their property in Spain for long-term rentals it may be possible to do it yourself or have a light-touch management company just in case of emergencies.

The management company can vet potential renters and co-ordinate with plumbers and other services where necessary. In that case the tenant themselves would be expected to look after pools, gardens, cleaning, etc., while the community fees will cover common areas.

Short-term and tourist rentals are considerably more work, involving weekly handovers, cleaning, keyholding, management of crises arising from problem tenants and a much greater need for quality cleaning and maintenance. After all, guests will be leaving reviews and your investment will rely on positive ratings.

While the cost of such services will be high – 15% to 30% of the income – they could be viewed as a valuable resource for maintaining income, not simply a drain on profits.

Other ways a property manager can help

Legal responsibilities

You cannot legally rent out property in Spain short-term without a tourist licence. A property management company specialising in rentals can organise these for you and ensure that your property complies with the law.

Maintenance

They should be experts in the business and will have economies of scale from dealing with such issues for multiple clients. Property management companies often have established relationships with contractors, which can make this process easier and more efficient.

Marketing

A property management company can also use their expertise in rentals to place your property on the right rental websites, take photos, write copy, welcome guests and manage reviews.

Money

They can also assist with financial management, including rent collection, paying utility bills and managing tax and insurance obligations.