Buying apartments to rent for an income in Tenerife

Since the law on apartments to rent and the illegal lettings has been enforced over the last 8 years or so, it’s become more and more difficult to decide if buying a property on a legally rentable complex, to provide an income, is actually a good idea.

The laws on short term rental are extremely complex…in fact, some of them are still being changed and decided upon as this article goes to press, so even now…not everything is clear cut.

What is very clear though is that if your intention is to buy a property on a complex as an investment by renting it to holidaymakers on a short term basis, you have to comply with the law and that part of the law is easy to understand.

Quite simply, the property must be on a complex that has the legal licence to allow the renting of property on a short term basis.

The property must be rented through the sole letting agent that is based on the complex and you must comply with their rules and regulations about how many weeks you’re allowed to use your apartment as an owner.

Each letting agent has its own ideas and rules about the sort of return that they’re going to pay the property owner and also how many weeks a year each owner is going to be allowed to use their apartment and because of that, it makes each apartment complex either more or less desirable to buy on…and therein lies the problem, with the letting agents and complex or hotel owners having such a large amount of control over what you can and can’t do, it can be difficult to make a good return on your investment – it’s out of your hands.

It’s not this article’s intention to name names because it’ll be unfair to those owners that have one to sell there or for people that want to buy one there.

But let’s look at what’s been happening recently…

I’ve heard of community administration companies charging close to €400 per month for community fees for a 1 bedroom apartment on a complex close to the beach… that’s clearly going to eat into any profits that you could make.

I’ve also been told that in another complex in Las Americas that the rental companies in charge of the holiday complex are returning €400 per quarter…yup you read it right…every month your income is €133.33, in return for them renting your €150.000 investment to their customers.

There’s also a complex in the Los Cristianos area that has been telling owners that they must put their property into the rental pool. Even though they bought it for their own use and have only ever, in fact, used it themselves, they were being threatened that if they didn’t put their apartment in the hands of the rental company, they themselves – the owners of the apartment – wouldn’t be allowed to use the communal parts ie, the swimming pool and hallways. As the owners said…”how would we be allowed to get to our apartment if they enforced that?”

The fact that hotel and complex owners are making these rules is pushing current property owners into a bit of a corner, although in some cases possibly illegally, it’s still very uncomfortable for owners – especially those that are not here in Tenerife to control the situation and also where Spanish is not their first language.

Add that to the fact that the rental companies generally only allow owners to use their own apartment for 4 weeks of the year, not for a couple months as you’ve possibly dreamed…oh, and when you do come to use your 4 weeks you can forget Christmas, Easter, New Year and peak times in the summer, they’ll want those times for themselves.

Happily, these incidents are reasonably few and far between and don’t happen in all hotels and complexes but even if we just assume that monthly community fees are on the high side, this has a massive impact on the potential income that an owner would receive and as such, could well affect your choice of buying a property as an “investment with perks”.

Part of the law, which you may already know about, is that friends and family can use your apartment, so this makes a little more sense to some people’s train of thought.

Charging your friends and family (or those that you want to charge) for the use of your apartment could pay for community fees and the general running of the property and although it’s not necessarily a great return, it’s less hassle, reduces your running costs and it’s reasonably legal.

Why’s it “reasonably” legal? – Well, if you’re allowing your 26 friends and members of your family to stay at your apartment for 2 weeks at a time throughout the year…and you’re never seen to be staying there, it’s going to be assumed…and rightly so, that you’re renting the property to holidaymakers.

So, has the death knell sounded for run-of-the-mill buyers wanting a return on their investment when buying a property in Tenerife to rent to holidaymakers?

It’s a possibility, yes.

It’s got to be said that it’s not like this in all of the complexes here in Tenerife and although the law is in place and some owners have been fined for illegal letting, as have some rental companies that are not the sole letting agents for particular complexes, there are still some complexes that realise that for them to survive they have to find other ways to work with their property owners.

What you’ve also got to realise is that this is Spain, things can be different…and there are some complexes and hotels that are being let’s say…a little flexible on the rules.

It works well on those complexes. The property owners are working with the complex owners and everyone is happy.

They’re not going against the rules of the touristic licence in such a way that it’s detrimental to the complex, property owner, holiday maker or the government, it’s just a sensible way of working together.

There are only a select few that are doing it this way where both parties are working hand in hand and those complexes that are playing hard ball will eventually either have to relax their rules for fear of pushing away the run-of-the-mill property owners and buyers or, as could very well be their intention, they could end up buying most of the properties on their complex…could this be what they’re after.

In my opinion, as a principle, I can’t see anything wrong in renting your property to the public on a short term basis.

I think that the laws should be changed to accommodate the private owner wanting to rent his or her apartment on a short term basis.

It could be overseen by some sort of regular inspections from the “Touristic Police” as some have called them and a tax or licence could also be paid for annually to pay for the Touristic Police and inspections.

It would be a win – win situation in my opinion.

The complexes that have got it right are working well.

The holidaymakers love it and are happy customers, the apartment owners get what they want – an income and the complex or hotel owners get what they really set out to do in business in the first place – an income and happy customers.

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