Holiday letting vs long term rental vs selling and money in bank

[Cruise]

A friend of mine owns a 2 Bedroom with sea view on a holiday complex but chooses to rent long term for 570E per month.

Her views are if

If I do holiday lets, what guarantee do I have of monthly income, plus cleaners, management has to be the company onsite who are not cheap.

But from 570E minus community apprx 135E per month on this complex minus IBI, Basura bills, water , insurance , repairs etc

Or sell for apprx 180,000E , someone told us today that the bank are paying 4.1% interest then minus I think 19% for some interest tax and be left with apprx 400E per month stress free...

What are your advice, opinions etc.

[Jimandsi]

Sell asap because property prices will continue to drop for the next few years.

Invest the proceeds with interest rate rises imminent.

Job done.

Just hope you can flog a 2 bed for 180k in the current economic climate though ?

[slodgedad]

Sell asap because property prices will continue to drop for the next few years.

Invest the proceeds with interest rate rises imminent.

Job done.

Just hope you can flog a 2 bed for 180k in the current economic climate though ?

That was my first thought. Selling ain't as easy as you think

[CIM]

Just hope you can flog a 2 bed for 180k in the current economic climate though ?

My thoughts too. That is not very good income for a property which your friend thinks they can sell for 180,000€ It is 2.67% non compounding with the risk being that the tenant could leave at any time. As an investment, currently its very poor.

[Loaded]

My first question would be which complex is it on? Second: has the onsite management company offered anything for bookings (a monthly fee or what?)?

Added after 12 minutes:

For example: on the complex I'm involved with I'm forseeing at least 40 weeks per year occupancy on a 1 bed apartment. that will net them 40 x 150 x 1.1= 6600 euros per year = 550 euros per month on average minimum plus Xmas new year weeks and extra people supplements we're talking an extra 400 euros per year so nearer 7000 euros = 583 per month for a 1 bed apartment less bills which in total are 2000 per annum.

The amount of 180k you mention for a 2 bed sounds like the same as most places in Los Cristianos (vic court, paloma beach, San marino, royal palm, castle harbour etc) so it seems like 570 per month is poor considering what I know 1 beds can get.

Then again 2 beds are harder to rent year long as 2 beds and there will be weeks sold under standard occupancy

[Cruise]

My first question would be which complex is it on? Second: has the onsite management company offered anything for bookings (a monthly fee or what?)?

Added after 12 minutes:

For example: on the complex I'm involved with I'm forseeing at least 40 weeks per year occupancy on a 1 bed apartment. that will net them 40 x 150 x 1.1= 6600 euros per year = 550 euros per month on average minimum plus Xmas new year weeks and extra people supplements we're talking an extra 400 euros per year so nearer 7000 euros = 583 per month for a 1 bed apartment less bills which in total are 2000 per annum.

The amount of 180k you mention for a 2 bed sounds like the same as most places in Los Cristianos (vic court, paloma beach, San marino, royal palm, castle harbour etc) so it seems like 570 per month is poor considering what I know 1 beds can get.

Then again 2 beds are harder to rent year long as 2 beds and there will be weeks sold under standard occupancy



Port Royale is the complex....Been on the market for 220,000E and had offers of 180,000E in the past and she turned them down...

What complex is yours and do you advertise lettings yourself... smile

Added after 7 minutes:


My thoughts too. That is not very good income for a property which your friend thinks they can sell for 180,000€ It is 2.67% non compounding with the risk being that the tenant could leave at any time. As an investment, currently its very poor.

I totally agree with you especially when she explained to the renters , to please check that everything is working and after 2 weeks any repairs are your responsibility.......7 weeks later they are still phoning and saying this is broken...etc....She understands that if it is something covered by her insurance, she will take responsibly,

CIM , don;t understand compound but if the rest are renting at similar prices how can she ask for 800E, 900E per month, which she did get in the past...

Really welcome your advise....thanks...smile..

[sarah012]

I would be careful with banks as they say one thing and give you a different paper to sign......My friend cannot touch her money for xx years ..they put it into something like a pension plan and she doesn¨t see any interest either...

[megsdad]

If you can sell then do so but dont hold your breath. If you own property here, IN MY PERSONAL OPINION, rent it for the next few years until the inevitable recovery.
Long let or holiday let? Depends on where it is, I personally long let, I find it less hassle. I remember holiday letting receiving calls at 2 a.m. saying theres a light bulb out from one drunken oaf, another called saying there was no loo roll and insisted I deliver some. I did and there it was under the unit in its wrapper.
" but I didnt know what papel hygenico was " was the reply I received, much prefer long lets although again not always a bed of roses, one of my apartments recently trashed and the git had used the deposit as his last months rent so leaving me out of pocket.
Bank interest? 4.1%? where? Fondo accounts with Spanish banks are pants, a small one I´ve got with Banca March of 5k tied up for 3 years which comes due next month with forecasts of 6%p.a. is returning me the princely sum of 5019€ !!! a return of 0.1% p.a.
The best one is a forum member, Paul Montague at Blevins Franks, ok its a substantial investment but returns well in excess of his forecast of 7%!! and not just a one off year, thats several years now, a true gentleman.
Finally UK property, a sound long term investment as the tenant pays for almost everything , unlike here, my Uk prop is returning me a good 6%

[Loaded]

Port royal is not legally a tourist complex so I'd take the 180,000 if you can get that much it, seems a lot.

Added after 7 minutes:

And remember the inspectors are looking for illegal rentals

[princessmonika]

well with the currant climate property is safer, than money in the bank, but if you need rental income to pay for mortgage than i would say, sell if you can--

[Jimandsi]

well with the currant climate property is safer, than money in the bank, but if you need rental income to pay for mortgage than i would say, sell if you can--



What's the logic behind that statement please, when property is declining in value and the o/p can get 4% at the bank ?

Am I missing something ? :confused:

[princessmonika]

well 4% how long do you have to leave it in the bank-- this time of my life i only would invest yearly, and i do not think you get 4% also after taxes here in ireland they take 30% so you are left with not a lot-- well yes if you have to pay a mortgage, but by the time you sell pay off your mortgage and pay all the other cost , you are left with very little--maybe nothing--

[Jimandsi]

But even 1% interest on your dosh is better than sitting on a property that is declining in value.

Isn't it ? :confused:

[princessmonika]

I would rather get rental from a property , property goes up and down ,so why sell when it is down, it will get up again in the next 10 years or less,

Added after 4 minutes:

if you have to rent out that is --otherwise you use it yourself

[timmylish]

There are clearly different issues at play here so different answers will arise. Firstly. How much did the property cost in the first place. If there is a BIG difference in equity to pp then IF you can get the 180k, TAKE it and run (remembering tax issues). Secondly. Surely the owners age must come into the equation? If elderly, why continue with the headache? If not, and you have time on your hands, get a letting agency to look after the property and give the owner a couple of hundred €,s per month income. Not a lot I know but something more than Bank returns. The reason I suggest the Agency is the 02.00 am call outs! After 10 years or so, the market will most likely catch up again and perhaps a good profit from selling would be the outcome. Lastly. Is there any pressure to sell. That may be the real determining outcome.

[princessmonika]

if you bought at the hight f the market, you will loose money and if you have to pay back your mortgage you end up with nothing or pay on top of it

[Cruise]

There are clearly different issues at play here so different answers will arise. Firstly. How much did the property cost in the first place. If there is a BIG difference in equity to pp then IF you can get the 180k, TAKE it and run (remembering tax issues). Secondly. Surely the owners age must come into the equation? If elderly, why continue with the headache? If not, and you have time on your hands, get a letting agency to look after the property and give the owner a couple of hundred €,s per month income. Not a lot I know but something more than Bank returns. The reason I suggest the Agency is the 02.00 am call outs! After 10 years or so, the market will most likely catch up again and perhaps a good profit from selling would be the outcome. Lastly. Is there any pressure to sell. That may be the real determining outcome.

You make some excellent points....She bought in apprx 1990, so apprx 65000pds on escritura rest was in black, She is apprx 45 ish, no mortgage....and she doesn;t trust agencies....suffered from a couple....but NOT saying all are the same....

[leo_london]

A couple of big "ifs" there.
It sounds a good idea to sell IF you can get 180K for the property, and IF you are able to obtain 4% net interest on the proceeds.
Both sound unlikely to me. There are hundreds of two bedroom properties around on offer for considerably less, so it will need to be a "bit special" ?..and I've not seen any offers of 4% interest (guaranteed) for a long time.

[Jimandsi]

The good old Post Office are currently offering 4.21%.

Will need to lock it away for 3 years though.

[cainaries]

I would advise anyone believing what they are told by a someone in a Spanish bank to ask around first. We invested (this is the wrong word, disinvested might be better) some money for 3 years, guaranteed income of x. But we didn't get x. We didn't even get all of the original investment back. (Jimandsi is just going to love this, stupid Brits, stupidly investing in stupid Spain). We were told that we had drawn the interest each year (which was true but we hadn't touched the capital) then there was the tax etc. which meant we actually came out with less than we'd put in. When the guy asked rather hopefully if we wanted to re-invest it we told him where he could stick it. So be warned. It won't matter if they offer 4% or 40% if they aren't actually going to pay it at the end of the day.

[Loaded]

Well obviously if you took the interest and didn't consider the tax there would be less there than when you began .....

[cainaries]

Well obviously if you took the interest and didn't consider the tax there would be less there than when you began .....
I'm sure it is obvious but at the time the man promised, almost on bended knee, that we would get the whole of the original investment back because we asked this question several times. The guy speaks excellent English, btw, so this was not a language hiccup. All I wanted to point out really was that the deal - as it was presented verbally was definitely not the deal we actual got. The 'contract' ran to about 10 pages of dense Spanish and no doubt made all the details clear but we trusted the info given verbally. Banks in the UK are in trouble for 'mis-selling' after all.

[doreen]

I would advise anyone believing what they are told by a someone in a Spanish bank to ask around first. We invested (this is the wrong word, disinvested might be better) some money for 3 years, guaranteed income of x. But we didn't get x. We didn't even get all of the original investment back. (Jimandsi is just going to love this, stupid Brits, stupidly investing in stupid Spain). We were told that we had drawn the interest each year (which was true but we hadn't touched the capital) then there was the tax etc. which meant we actually came out with less than we'd put in. When the guy asked rather hopefully if we wanted to re-invest it we told him where he could stick it. So be warned. It won't matter if they offer 4% or 40% if they aren't actually going to pay it at the end of the day.

One of the problems I have found with Spanish banks is that they seem overkeen for you to invest in Funds, rather than what we would call a Deposit account - sadly, higher commissions might explain their advice at times :(

[offshore diver]

best to stear clear of those funds ,they always try that ,must be the commision ,but the straightforward deposit accounts give a fair return of interest paid monthly or yearly and tax free if non resident or based outside the eu ,and the rates will be back at 4 percent apox in 2 or so years ,much better return than rent from an apartment ,all the hassle that goes with it derramas , community politics etc , the exception is people who bought apts in the mid 90 s or before in a frontline position for around 24 grand sterling ,then your investment return is okay compared to the price paid ,who knows mabey long term rents will go up like few years ago