Holiday Rental vs. Long-Term Rental – Best Property Investment in Spain?

1️⃣ Holiday Rentals – Pros & Cons

A holiday rental (also called a short-term rental) is typically listed on platforms like Airbnb or Booking.com and rented out on a weekly or daily basis. This option can generate higher returns, especially in prime locations, but requires active management.

✅ Pros:
✔️ Higher rental income potential (especially in peak season)
✔️ Flexibility—owners can use the property when they want
✔️ Attractive to tourists & expats looking for short stays
✔️ Can increase property value with high-end renovations

❌ Cons:
❌ Requires active management—bookings, check-ins, cleaning, maintenance
❌ Seasonal demand—slower months in winter
❌ Stricter regulations—some communities & cities restrict short-term rentals
❌ Higher taxes—rental income is taxed at 100% (compared to 50% for long-term rentals)

2️⃣ Long-Term Rentals – Pros & Cons

A long-term rental is typically leased out for one to five years to a tenant, providing stable and predictable income. This is a more passive investment strategy with fewer management headaches.

✅ Pros:
✔️ Steady & predictable rental income
✔️ Lower management costs—no need for constant cleaning or guest services
✔️ Lower taxation—in Spain, only 50% of rental income is taxed (if you are a resident)
✔️ Ideal for investors looking for hassle-free income

❌ Cons:
❌ Less flexibility—owners cannot use the property whenever they want
❌ Lower rental yields compared to holiday rentals
❌ Tenant risk—eviction processes in Spain can be slow if tenants stop paying
❌ Locked-in contracts—most tenants have the right to stay for up to five years

📊 Financial Breakdown – Which Makes More Money?

Camilla owns one holiday rental und one long-term rental—making her the perfect person to compare both strategies. Here’s what she found:

• Holiday rentals bring in around 20% more income than long-term rentals.
• However, if managed by a third party, property management fees (20-30%) wipe out most of the profit advantage.
• Long-term rentals provide consistent income without the hassle of managing frequent guests, check-ins, and maintenance.
• Taxation: Holiday rental income is taxed on 100% of earnings, while long-term rental income is taxed on only 50% (for residents).

🏆 Verdict?

✔️ If you live abroad or want a hands-off investment → Long-Term Rental
✔️ If you want higher earnings & don’t mind managing bookings → Holiday Rental

💼 Management & Legal Considerations

Holiday Rentals:

• You’ll need a tourist rental license (rules vary by region).
• Some communities and cities are restricting short-term lets, so check local regulations before buying.
• Expect to handle guest check-ins, cleaning, and maintenance, or hire a property manager (20-30% fee).

Long-Term Rentals:

• Tenants have the right to stay for up to 5 years, so you need to be sure about your long-term commitment.
• You’ll only pay tax on 50% of rental income (if you’re a resident).
• Less maintenance—tenants take care of small repairs.
• Consider rental insurance to protect against non-paying tenants.

🔮 Future Trends in the Spanish Rental Market

Camilla believes that Spain’s short-term rental market is changing. With new regulations being introduced, many investors are reconsidering their strategies.

• More communities banning holiday rentals → Could make long-term rentals more attractive.
• Rental demand is increasing → Prices for long-term lets are rising, boosting ROI.
• More people moving to Costa del Sol → Cities like Málaga and Marbella are seeing expat and remote worker booms.