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Short-term lets vs long-term rentals

Five years after the arrival of Engel & Völkers in Madrid, we want to share our knowledge about the rental market with you, based on the experiences of our team of more than 50 consultants. 



There are currently two options offered in Madrid: holiday or short-term lets and long-term rentals. 



Attracted by the high returns that can be obtained through short-term lets, investors tend to choose this option, but more and more landlords are now opting for long-term rentals. 



Let's make a comparison, taking as an example a 2 bedroom furnished apartment in the Centro district. 




Madrid - grafico alquileres.PNG

We are starting from the basis that short-term rentals is very favourable for the landlord, because we assume that the price of the apartment is 40% higher in the short-stay rental, and it is possible to obtain an annual occupancy rate of 80%. 


Despite this, we can see that the net return in the first year is 3.31% for short-term let compared to 3.48% for long-term let, assuming the value of the property is 350,000 euros. This is mainly due to the estate agency’s fees (the management fees are usually 20% of the total annual income generated by the short-term let property) and as for the tax (in the long-stay rental, the landlord is exempt from paying income tax for 60% of the income obtained). 



Madrid - corta estancia.PNG

On the other hand, we have extended the comparison to the next four years, since with the current Royal Decree 7/19 of urgent measures in the housing and rentals market, which gives the tenant the right to extend the contract for up to five years, it is very likely that the tenancy agreement, which was previously valid for 12 months can be extended to five or even seven years. In this case, the net profitability increases even more, due to the fact that the owner does not have to reimburse the agency's commission, so their profit can reach more than 4%. 





Madrid - vivienda habitual.PNG
Madrid - alquileres corta y larga estancia.jpg

Finally, we want to point out other factors that make long-stay rental more advantageous: 



• Less worries (once the tenant is found, they usually stay longer than a year) 


• Stable income over a longer period of time 


• Lower risk of having an empty home........ 


• Less expenses in cleaning or repairs 



At Engel & Völkers we specialise in the management of these types of properties. More than 1,500 landlords entrust us with the rental of their homes every year. 



Author: Belén Egusquiza, Director of rentals at Engel & Völkers Madrid.




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