The rental demand has never been stronger and with this increasing demand and lucrative income potential, more property owners are putting their properties on the rental market. Often renting for just 4 to 6 weeks can cover annual running costs, so for many, the temptation is too great. The price range can vary from around EUR 2,500 per week for a 2 bedroom apartment to over EUR 25,000 per week for a high-end luxury villa.
Is it safe to put your property on the rental market?
The major concern for all villa owners is the well-being of their investment. The ideal situation is to find a property manager who can also act as your rental agent. It is essential for them to have a strong direct client database, so bookings via third party agencies with unknown clients can be avoided. This arrangement secures peace of mind that is crucial for the rental process to work for all parties.
Is it worth renting after agent commission and taxes?
A good rental agent will suggest what the potential weekly rental price could be for your property. Usually this would include 20% agency commission as well as 6% VAT. Your NET figure will not change unless previously agreed discounts are offered for external factors (building works nearby, etc.). A stamp tax must be paid which is 10% of your monthly income. Say you earn EUR 60,000 in 2018, you can divide this figure by 12 months equaling EUR 5,000. The stamp tax is therefore EUR 500 per year.
25% of your rental income is paid forward as a government retention tax as soon as the rental receipts are issued by your fiscal representative. From your EUR 60,000, EUR 15,000 will be retained – to be claimed back by presenting costs in your annual tax return. We have found that our owners have been receiving roughly 80% of this back.
Is the bureaucracy of getting an AL License worth the hassle?
The acquisition of the AL license (Alojamento Local – the license required for short-term holiday rentals) has a reputation of being difficult to obtain. Let us put your mind at ease. A good agency will take this in hand for you. This AL license is supported by a rental contract between you, or the corporate structure which holds the property, and your property manager. Once your property manager has the license, they are responsible and liable for all rentals in your villa. Of course, there must be full understanding between owner and property manager, as the villa and its grounds must be kept in a high state of maintenance and fit for purpose.
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