Gross sounds great, net is what counts
Sellers and estate agents like to talk about gross yield, because it sounds impressive. But the amount that remains after costs and tax is what counts. For rental properties in Marbella the gross yield typically lies between 4 and 7 percent, while net often works out at 2.5 to 4.5 percent.
That difference lies in management costs, vacancy, maintenance, tax, and the comunidad. Anyone who looks only at gross structurally overestimates their return by a third or more.
A gross yield of 6 percent sounds good, but after all costs and tax you often keep 3 to 4 percent net of it. Always calculate right down to the bottom line.
What determines your rental income?
The rental income depends on a number of factors that you partly control yourself. Location and quality are decisive, but so is how professionally you rent out.
- Location: close to the beach, Puerto Banús, or golf rents best
- Season: in July and August the weekly rates are several times higher than in winter
- Quality and furnishing: move-in-ready, photogenic properties rent faster and at higher rates
- Occupancy rate: realistic is 60 to 75 percent over the year for a good tourist property
- Rental licence: without a valid licence you may not let short-term to tourists
A worked example
Suppose you buy a two-bedroom apartment in Nueva Andalucía for 450,000 euros. In high season you charge 1,800 euros per week, in the shoulder season 1,100 euros, and in winter you let by the month. At a realistic occupancy you arrive at roughly 28,000 euros gross rental income per year.
That is a gross yield of around 6.2 percent on the purchase price. But deduct management (20 to 25 percent of the rent), cleaning, comunidad, IBI, insurance, maintenance, and tax, and your net comes out closer to 3.5 percent.
The costs that eat into your yield
The difference between gross and net lies in a series of costs that are easily underestimated. Management is the largest: professional rental management charges 20 to 30 percent of the rental income, including guest contact, cleaning, and check-in.
In addition you pay comunidad contributions, IBI, building and liability insurance, periodic maintenance, and the tax on the rental income. For EU residents that is 19 percent on the profit after deductible costs, which quickly amounts to thousands of euros a year.
The return that is often forgotten: capital appreciation
Rental yield is only one side of the coin. The Costa del Sol has shown strong capital appreciation in recent years, on average several percent per year in the most sought-after neighbourhoods, more in the top segments. That total return, rent plus appreciation, is for many buyers the real reason to invest.
Never count that appreciation as guaranteed, however. The market can stagnate or fall. A property that is worthwhile purely on rental yield as well absorbs setbacks in value development better.
Look at the total return: rental income plus any capital appreciation, minus all costs. A property that has to rely on appreciation alone is more vulnerable.
How to maximise your yield
The difference between a mediocre and a good rental investment lies in the choices made beforehand. Buy in a neighbourhood with year-round demand, make sure the property has a valid rental licence or can obtain one, and invest in furnishing and good photos.
Choose reliable rental management and keep a close eye on the occupancy rate. And before the purchase, calculate the net yield on realistic figures, not on the seller's optimistic projection. That single piece of calculation beforehand determines whether you are satisfied ten years from now.
Frequently asked questions
What is the difference between gross and net rental yield in Marbella?
Gross yield for rental properties in Marbella typically ranges between 4 and 7 percent, while net often comes out at 2.5 to 4.5 percent. The difference lies in management costs, vacancy, maintenance, tax and the community fee. Anyone looking only at gross structurally overestimates their return by a third or more.
What determines the rental income of a rental property?
Location (close to the beach, Puerto Banús or golf rents best), season (weekly rates in July and August are many times higher than in winter), quality and furnishing, occupancy rate (realistically 60 to 75 percent per year) and a valid rental licence, without which short-term tourist rental is not allowed.
Which costs eat into your rental yield?
Professional rental management charges 20 to 30 percent of rental income. On top of that you pay community fees, IBI, building and liability insurance, maintenance and 19 percent tax on rental profit for EU residents after deductible costs.
Want to know what a property really earns?
We produce an independent yield calculation on realistic figures, including all costs and tax. So you know what you keep net.
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