Long Term rent, Don Juan, advice

I complete soon on my 2 bed apartment in don Juan. Unfortunately, i recently lost

my job and its therefore essential that i rent the place quickly, i may have to drop the 

asking price and am looking for a long term rental. It can be furnished or not. its in phase 2

block 3 and has one of the better views.  Does anyone have some advice, know someone interested,

contacts, how much i can expect to ask and will i be taxed on the income. Any advice would be welcome.

thanks Dave. 

 Hi David,

You´re not the only one in this situation. As property manager for Don Juan we get these questions on a regular basis. The problem is the developer you bought from is in serious financial problems so he is offering the apartments for a low price. Not only that but he also offers a let to buy scheme where you pay 600E a month for a long term rental and if you decide to buy it, the rent is considered as a down payment on the mortgage.

So a long term renter will never pay more than 600 Euros and usually much less to an individual letting out, because with the promoter he has the chance to buy it at a very low price when the market reaches his low point,  while his rent is not waisted. You can´t compete with that.  

Banks have a huge stock of reposed property. My own bank has a stockpile of 3000 apartments so when the market starts to recover they will offer theirs at a huge discount and an attractive mortgage. It´s quite difficult to get a mortgage as a foreign buyer at the moment.  

We have a list of apartments for long term rent in our portfolio but the owners are not willing to take 500E / month so nothing moves. Your best chance to get at least some money is to rent it out for holiday rentals. We do that as well and are quite succesfull as we do it on a large scale and with a professional approach.

Send me a pm if you wish about renegotiation your current mortgage as I know how to do it, but it´s not fit for a public forum. The same goes for tax questions etc.

Max.

My view on this, is that rents will vary at Don Juan and will be dependant on the location (view), size, type and how well the apartment is furnished and equipped. I am sure that the developer will be able to get 500 euro a month on an empty unfurnished apartment which is facing the back of another block. I believe that you should be able to command higher rents for better placed and better equipped, fully funished apartments.

With regards to people that have the "developers" mortgage on phase one, I   investigated this recently and they will allow you to pay it off in full with only a 1% penalty which I felt was quite fair.

Regards Andy

As with anything the price is effected by the laws of supply and demand. There is a lot of apartments available for long term rent including front row beach apartments in Carvajal. If you want to rent long term you will have to accept what you can get. If you let for a year at 500€ a month paying an agent 1 months rent as commission that would be 5,500€ net income.

There is also a lot of apartments available on the holiday rental market. I know of a number of people in Don Juan who do short term lets but only manage to let out during the summer. By the time you pay marketing and servicing costs would you really make more than 5,500€ per year on holiday rentals?

 In broad lines I agree with Andy´s last post. Carvajal will be developed and is designated as the luxury part of Fuengirola. The town in his development plan is very clear about this. They want a piece of the luxury market which now goes to Marbella and some parts of Benalmadena.

There are strict regulations about building in this area which will guarantee that we only will see high class residentials in the land between us and El Higueron. Most of it is already licensed by a huge developer who will have to build a combination of villa´s and apartments but all with luxury facilities and lots of atrractive looking garden areas. 

For the time being however the developers don´t want to build anything. They don´t employ real estate agents but financial experts to renegotiate with the bank every two months to get their own mortgages on existing but unsold apartments paid. If I had the money I would buy now directly from the bank and would make a huge profit in ten years time.

The part about dodgy English real estate agents who had no knowledge at all and and promised you a rose garden and a rental income of 1000E per month is true. They all disappeared but the owners of the bigger ones still have their own football club in England. It were the customers and the freelancers who worked for them as ´agents´ who are left behind with the damage done and in lots of cases stolen money. F.i. in Don Juan several people bought a rental package (!!!!), but to be allowed to pay that money to the agent they had to buy the furniture from the real British furniture package companies. The agent got another 10% on the 15-20k package and then the owners heard nothing.

They complained to me that they didn´t get any rentals for their prepaid marketing and rental package while I had to inform them that it had been filled back to back with holiday makers. They pocketed even the rental income!

Andy´s complaint about the prices and service levels I can´t judge.  I live here, never buy anything owned by Brits and never eat there. The Spanish shops always have fantastic service, the restaurants which focus on their own people deliver excellent value for money and  we were shocked when we went back recently to the Netherlands to discover that you have to pay much more in the supermarkets and restaurants while the quality was much lower.

 Reacting on Andy´s and David´s earlier posts I can only say that it doesn´t reflect the reality on the ground. I know a lot of real estate agents (good ones who know what they are talking about) and have a lot of experience myself.

We do long term lets ourselves for years now and rarely get a renter because the prices people want are too high. We tell them of course but they stick to these prices. I show interested renters around on a regular basis and they sometimes openly laugh if I them the monthly price. With 10.000´s of apartments offerered for long time at the Costa it´s buyers time. 

And we advertise in twelve countries, communicate in four languages and the combined portals reach more than 100.000.000 visitors. We live on site, can show them on the spot and know why they don´t take it. Always the same reason: price.

We are not the only very good residential on the Costa and that´s your competion in the rental market. Some of the people we showed around are now nice neighbours in Phase II; they like the idea that their money is a virtual mortgage payment if they decide to buy it. A perfect deal as most people expect the market value to go down even more in the second half of this year as the bank have to dump all their 10.000´s of repossesions.  They want to free up their money to lend it out to profitable business and not own bad loans and property.

 Sorry for these series of posts, but I wanted to split up the several issues. This about long term versus short term versus holiday rentals.

First the explanation of the three terms. What most people call long term is under Spanish law an unlimited period of time in which you can´t get rid of renters because they have very strong consumer protection laws and enforce them. 

What most people actually means is short term, meaning 11 month contracts. That has to explicitly in the contract otherwise the judge considers it an unlimited period. And an English contract is not valid so it has to be stated in Spanish with specific phrases to be considered a legal 11 month (short term) contract. 

What people used to do is let it out for 11 month and renew the contract with the same renters directly after that period. You think you do it right this way, but the judge has ruled many times that this is considered a permanent rental so renters can stay for five year with an option for three years.

Circumventing this by creative ways (officially one month another renter and then the old ones back in, while in reality they just stay and pay one month in cash without contract works only if both parties keep this silent. And that´s your problem: your renters could always explain that it went this way and the judge again ruled in many cases that it was clearly a way to circumvent the legal rights of the renters and grants them an unlimited status.

So be very, very careful as consumer protection laws are fiercely enforced and lots of people have the same knowledge I have and go along with the renewal after the ´skipped´ month just to send you a letter a month later that they now consider themselves long term renters in legal terms. And you are the one who has to go to court if you don´t agree and have a high chance of loosing.

Holiday rentals are legally the same as 11 month contracts, but there you don´t have a risk because you agree to a few weeks and if they don´t leave after you contacted them you kick them out by calling the police.

 So now everything is clear we can go back to the original question from the poster and David´s calculation.

Summary for people who don´t like all these long posts: if you can´t sell it at the moment holiday rentals will earn you more than so called long term contracts. Below are the details.

In an ideal world you get renters who want to spend exactly in your apartment, pay correctly the rent and the utility bills and leave on the last day. The agent takes a month cut so you end up with ten months nett ad 500 Euros as David suggests. That would earn you 5000 instead of 5500, but that´s small difference. 

Now the reality: most people renting ´long term´ (see the posts below) have no intention at all to stay in your apartment for 11 months. They either want to rent it for until they find something else or renew the contract if they are happy. The ones who actually just want to live there just want to resume their 11 month contract year after year until they have a reason to move. See the post below why this is a problem for you, not for them.

The other group is unfortunately much bigger. They hire it for 11 months because you insist on that length, but they have no intentions at all to fulfill it. They will just leave after a few months because their own house is finally ready, or they find something closer to their work or they have other personal reasons to hire something for longer than a holiday apartment.

You won´t even notice that they are gone because the rent doesn´t come in and you can´t reach them. 

So you safeguard your contract with a two month deposit on the rent or if they argue about it settle for 1 month. For them it doesn´t matter. They loose that money but still they paid only six month rent for a four month period f.i.  This happens so often and all the rental agents know it. So after about six months you are sure they are really gone and you got 4 months of payment and two month deposit minus the month the agent took. So you think you have 2500 Euros and meanwhile you discovered that they didn´t pay the utility bills for the last two months they stayed there so nett you have around 2100 Euros. 

The agent puts it back on the market and after three months because he is exceptionally good (as in that rarely happens) he finds you a new 11 month contract. He gets his month fee again because that´s the rule. Then the same thing happens.

That year you made 2250 for six months + 3 months nothing and the remaining three months of that year will earn you 1500 minus 500 to the agent. The total over that year is 3250E. Oh, and and deduct you had to pay the fixed part of the utility services during the three empty months. 

Of course these are all assumptions but every rental agent knows that this is the reality and that these figures on average are correct..

Now this assumed that you had your first renter in precisely at the moment you decided to enter that market which is not possible but over multiple years this will even itself out. Your wlll be around that amount, but there is BUT.

You can be lucky and have a nice family which takes good care of your apartment or unlucky as one our Don Juan neighbours experienced and have the renters from hell. So you always have to pay for a proper clean before you let it out again, but you have to be realistic and know that chances are that you will have to paint the apartment after they leave,  replace on sofa because of the unrepairable scratches and that you possibly need a new television because the old one is gone with the renters.

You can´t forecast these costs, but you can be sure that this will happen.

Of course in an ideal world they would notify you of their leave, let you have a proper inspection, loose their two month deposit because they leave before the contract ends and pay you willingly for all the damage done and the cleaning needed. Dream on I would say.

Can´t you get them to fulfill to pay for the whole 11 months as agreed etc? You have a contract isn´t it. So you go to court and sue them. If you are Spanish and your renters are Spanish this can be succesful, but first you have to find them. They rarely leave an address. In the end you could succeed but you´re facing high costs then.

If the owner is not Spanish it´s completely impossible. You will never find them back and even if you happen to be both British and hire an agent to find them in Britain you have to fight it over a Spanish contract which will be very difficult and costly.

So to summarize: a long term rental at the amount David suggested gives you an actual net income with a maximum of 3000 Euros with a possible risk that it´s less.

The alternative is to let it out for holiday rentals which is a lot of work if you do it yourself and the marketing costs, the payments for cleanings, key transfer and you have to pay a local guy who keeps an eye on it and makes sure it´s ready for the next rental  If you don´t have the time to respond on all enquiries, update your availibilty calendar, waste hours on enquiries which in the end don´t go through you can hire an agent who handles it all.

Being an all-inclusive agent while we also work for people who do the hard work themselves and were we just are keyholders, arrange cleaning and make sure the deposit is kept if there is damage I know what the earnings are.

if you don´t want to use all the holidays yourself and give the key to family and good friends during the summer but just makes it available for the whole year than you will earn nett around 5000-8000 Euros a year. You just have to subtract the uitlity costs and realize that after two or three years it can use a bit of paint and of course your furniture has to replaced once in a while just like you do at home. The utility costs which will be less than 1000 Euros a year. So you will always win over the 11 month and if you have an agent you just see money coming in and don´t have to worry about renters, cleaning after they leave, visiting it yourself to check the state they left it in.

Max.

Summary for people who skipped all this: if you can´t sell it at the moment holiday rentals will earn you more than so called long term contracts.

mmm.......a couple of points on this.

1) Arrohabitage are focused on selling apartments. They are offering bare apartments (no furniture or even light fittings are supplied). This does not suit most genuine rental clients who want a furnished apartment.

2) There are good long term rental clients out there. If you use a good agent that vets the tenants there is no reason why you should encounter the sort of problems Max describes. There have been some "bad" long term renters in Don Juan but there are also many successful ones. So while I would not recommend taking this option without due care I wouldn't write it off either

 I'm extremely busy these days so I rarely look on EOS.

Just some notes regarding Davids post.  

Most genuine 11 month renters want unfurnished apartments because they are a family and have their own stuff. People traveling with just some clothes are to be distrusted as they don´t seem to have any ties preventing them from disappearing. 

Luckily most of the 11 month contract enquiries we get are for unfurnished apartments. 

Regarding the experiences in Don Juan. We vet our customers very careful and so far had no problems (but we are very strict so we refused most and filled only two), but the majority of the long term rentals in Don Juan through agencies has ended in a tragedy. We know almost everyone here so we are in a very good position to know.  We have good contacts with at  least 70% of the Spanish, English, Irish etc.owners and almost all of the renters and i don´t know how you could come with the reverse statement. How many succesfull 11 month contracts do you know here? I plucked my brains, but I really am clueless.

And like I said the maximum price for long term rents keeps going down so it´s hardly worth the trouble and certainly not if your apartment is furnished as that attracts the wrong renters and you could end with much more damage than if you let out a bare apartment which people furnish themselves. 

Max.