Investing in Spain is booming. The finfluencers would have you believe the returns are enormous. There are even awards handed out for the highest rents. But what is the yield really like?
Contents
- Why invest in a holiday home?
- How do you calculate the yield on your holiday home?
- Which other taxes and rules apply?
- Buying new-build and selling at a profit
I was sitting on a terrace in Moraira with a friend recently when she said: “Everyone goes on about making money from a holiday home, but mostly I'm the one bringing money to Spain. I enjoy my own house during the most expensive weeks, and the rest of the time all I do is pay taxes, the gardener, the cleaner and the pool boy.” She had bought her house mortgage-free and mainly lets it outside the high season, which makes the tax bill relatively high. But what she didn't know: in Spain you can deduct mortgage interest from your rental income, and your own holiday is a form of return too — you're not paying for a hotel, after all. So how does it all actually work, the tax and the yield? We explain how to calculate your return, which costs come with it, and why smart financing can make a real difference. The choices you make, and the tax consequences they carry, really do matter.
Why invest in a holiday home?
A house in Spain — a bit of a dream, isn't it? Lovely weather, long evenings under the naya and wonderful food. A second home used to be reserved for the very richest; now it is far more ordinary. But people increasingly see it as an investment and much less as a place where the family gathers generation after generation. It's somewhere to escape the Dutch rain, where you walk along the beach in the morning and dine under the stars in the evening. Demand for holiday homes in the region is high, too, and average gross rental yields in the Comunidad Valenciana sit at around 7.9%. But yield isn't only about rent: your property itself can rise sharply in value (and of course fall). According to recent figures, sale prices for existing homes in the Valencia region rose by roughly 18% between July 2024 and July 2025. Forecasts for 2025 point to another 18% growth for the Valencia region. Fairly startling numbers — for context, in Utrecht the increase between July 2024 and July 2025 was 4.4%. Quite a difference.
The rises are very steep at the moment, but is it still interesting when prices aren't climbing that fast? It can be very attractive then too. Your fixed costs and mortgage payments can be covered by the rental income. That gives you free holidays. Let it out a little more often and it can even become a nice little savings pot. Got a mortgage? Then you're paying it down with the rental income, so your guests are helping to repay your mortgage and build your capital.
How do you calculate the yield on your holiday home?
Honestly, all the yield figures you hear give me a bit of an error message. Because it depends on so much. Are you talking gross or net yield? Return on your own money, or on the total investment? Are you factoring in your own use? I get so many questions about this. That's why we work with a clear yield calculation for our clients, so we all know what we're talking about.
Step 1: estimate your occupancy and your rates
Holiday letting is seasonal. In high season (the summer months) average houses and apartments in popular villages such as Moraira or Jávea often fetch €175 per night; mid-season the average is €110 per night, and in winter €75 per night. If you're talking about large, more expensive villas, well, that's a completely different sum. Let your house out around 60% of the year and you land at roughly €25,000 in gross rental income. Let it around 40% of the year and you come to roughly €16,667 gross rental income a year.
Step 2: map out the costs
Letting out a property means more than handing over the keys. Think about:
- Rental management: if you outsource it, count on ± 25% of your gross rent. Through Airbnb or Micazu this averages 10%.
- Maintenance and cleaning: regular maintenance and a professional clean after every stay; budget €1,500 a year.
- IBI and the waste charge: property tax (IBI) is roughly €200 per €100,000 of cadastral value (which is not the value of your house), and from April 2025 there is a new waste charge averaging €120 – €200 a year.
- Community fees and insurance: with apartments the owners' association can add a surcharge of up to 20%. Don't forget your liability insurance either.
In our worked example, total running costs come to around €12,000 a year.
Step 3: work out your taxable profit
As a non-resident EU citizen you pay IRNR (Impuesto sobre la Renta de No Residentes) in Spain. You may deduct your costs, including mortgage interest, and you pay 19% tax on the net rent. Without a mortgage, your taxable profit on €25,000 of rent and €12,000 of costs is therefore €13,000. You then pay €2,470 in tax and are left with €10,530. Bit of a bummer, isn't it — you generally don't hear the finfluencers talking about that tax. So think carefully in advance about whether what's left is enough for you.
What if you don't let it out?
We were talking about this at yoga the other day. The Spanish tax office still assumes a notional rental income. So you effectively always pay tax, even if you never use the property as a holiday let and only use it yourself. Bear that in mind. If you don't let your property out at all, there's still no escaping the tax. Spain levies a notional rental income based on the cadastral value: 1.1% of that value (or 2% if the cadastral value has never been updated). On this notional income you pay IRNR at 19% for EU/EFTA residents, or 24% for non-EU/EFTA. It is essentially a sort of eigenwoningforfait (formerly huurwaardeforfait) as we know it in the Netherlands.
An example: say the cadastral value of your property is €250,000. The notional income is then 1.1% × €250,000 = €2,750. As an EU owner you pay 19% IRNR on that, so €522.50 a year. And if you keep a property entirely for your own use, the annual charges such as IBI, the waste charge and community fees are still due on top.
Interest relief only applies, of course, if you have a mortgage and let the property out (at least partly). If it sits empty or you use it yourself, you can't deduct the interest. So think this through carefully.
Mortgage or no mortgage?
The nice thing about a Spanish mortgage is that the interest is deductible from your rental income, which lowers your taxable profit and therefore your tax bill. Finance 70% of your €250,000 property (so €175,000) with a 20-year repayment mortgage at 3.5% interest? Then your annual mortgage cost is around €12,179, of which some €6,125 is deductible interest. Your taxable profit then drops to €6,875 and the IRNR to €1,306. On top of that you're building capital through the repayments. But if you have increased your mortgage in the Netherlands, that interest is not deductible. So think hard about how you want to finance your property and what the tax consequences are.
So do also realise that if you finance the house but don't let it out well enough, the house can end up costing you a fair amount of money. Curious what's possible and what your own sums might look like? Book a call and we'll talk it through together.
The power of reinvesting
We have a really lovely house in Spain ourselves. Bought without a mortgage, for letting out. Perfect: a separate guest annexe. A big garden, always sun and shade. A separate toilet and two bathrooms. A well-kept urbanización. Perfect for letting. The thing is, in Spain you can't increase your mortgage or take one out on a property you already own, the way you can in the Netherlands. Apparently there are tricks for it, but it's complicated. Even though we thought we would keep this house forever, we're going to sell it after all, because we can't put the money from the increase in value to use and we have no deductions against the rental income. A shame, because it really is a lovely house. Our life and our plans have turned out differently than we expected.
Still, it really is something to think through. In Spain you pay 10% transfer tax. So that money is already gone. And if you sell your house as a non-resident (or as a resident within 3 years), you also pay 19% tax on the gain. Quite an expensive business, which is why flipping isn't always that attractive either.
But with a mortgage-free house and enough income, it can be very interesting to sell it after all and buy several cheaper properties. That gives you more liquidity — in Spain you need around 45% of the property value in your own funds. And then you can deduct the mortgage interest from your tax and your tenants pay off your costs. That can be really quite attractive. Want to know more? Book a call.
Which other taxes and rules apply?
We often think of Spain as a tax haven compared with the Netherlands. Sadly, it's a nasty disappointment.
- Transfer tax (ITP): on existing homes you currently pay 10% of the purchase price. From 1 June 2026 this rate drops to 9%.
- VAT (IVA) and stamp duty: new-build carries 10% VAT and 1–1.5% stamp duty
- Notional income: if you don't let it out, 1.1% of the cadastral value is taxed as notional income at 19%
- Tourist licence and owners' association consent: since 3 April 2025, in the Comunitat Valenciana you need the consent of 60% of the owners' association to allow tourist letting. You also have to register your guests through SES HOSPEDAJES and quote your licence number in your adverts.
Curious about all the other tax rules in Spain? We've written a blog about that before, and about the Beckham law.
Buying new-build and selling at a profit
You hear it more and more often: buy new-build now and by the time it's completed it will be worth €100,000 more. Demand is huge and you can turn a quick profit, easy peasy. You have a payment plan and you don't even need all the money, because you'll have sold it before then. But don't be fooled. In Spain you pay the estate agent an average of 5% of the sale price in commission. Here's an example:
You buy an apartment for €319,000 and after 2 years you can sell it for €425,000. You pay the VAT and the costs, around 15%, and that is already €47,850, plus estate agency fees of €25,712.50
