Holiday or residential rent: what is more profitable?

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It is getting more and more common to rent houses or flat that were first destined to be holiday houses for long periods of time. Websites such as Airbnb or Booking are highly used by people that want to rent a place for longer periods of time. But, are holiday rentals more profitable for owners than traditional rental?

A research carried out by Airbnb in Barcelona states that 78% of the entire apartments shown on their website provide less profit for owners than the average ‘traditional landlords’ earn with their rentals.

This topic is very interesting to those owners who want to rent their house and are thinking whether to rent it as a holiday rental or during the whole year as a long-term rental.

Joseba Cortázar, the spokesperson of HomeAway, affirms that, normally, holiday rental could be more profitable. However, in most cases, owners do not keep in mind the management and maintenance costs that renting a holiday house for short periods of time imply. If the owner is in charge of the management of the property, these costs will be cheaper but if a third person takes care of all procedures and paperwork, profits tend to decrease between 15% and 25%.

Another thing to take into account is the tax treatment traditional rental houses have in comparison with holiday rental houses. Owners of a traditional rental house can subtract a 20% of the income obtained and they must pay between 21 and 25% of taxes. Holiday rental owners, however, cannot subtract anything and they will have to pay 35-40% taxes.

How much income do I have to obtain from a holiday rental so as to be as profitable as a traditional rental? Asier Pereda, president of the Tourist Apartment Association of Euskadi, comments about this issue. In a city like San Sebastián, a house rented for longer periods of time that obtains 12000 euros net per year (1000 per month), in order to be used as a holiday rental house, it should obtain a minimum profit of 24000 euros net. Twice as much as a traditional rental. This would mean renting the holiday rental for, at least, 160 nights per year and 150 euros per night— figures that not all properties can achieve.

If you own a rental property, you should take into consideration a number of factors that will affect the number of tenants per year that your house can have, such as the distance to the coast, the tourist high season (if it is just in summer or during the whole year), the number of tourists, etc.

In general, if you do not live in a city that has a lot of tourist during the summer or where tourism is not a main activity during the activity, renting your house with a traditional rental contract is the best solution to obtain greater income and enjoy the tax benefits of this type of rentals.

You can contact a Gestor Administrativo to help you with any rental or tax procedure.

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