Property investment in Spain can be both highly rewarding and challenging. Although many investors see big opportunities in buying rental property in Spain, many of them make mistakes and face risks that can easily be avoided.
If you want to maximise returns and minimise the rental risks, planning ahead and noticing these tips to avoid the main risks property investors face in Spain could make a difference.
Tenant Screening: Key Points
One of the most common risks property owners face is choosing unreliable tenants, which usually means late payments, unpaid rent or property damage. These problems can quickly lead to a decline in profits, or even put the sustainability of your investment at risk.
To minimise the probability of developing issues with tenants, most property investors use tenant screening. Some of the main points to notice when choosing the right tenant include:
- Employment and income. Always request proof of stable employment or sufficient income. This provides reassurance that the tenant has the means to pay regularly.
- Ask for references. Speaking with former landlords is useful to learn whether a tenant paid on time and respected the property.
- Interview potential tenants. Sometimes, trusting your guts is the best option. Face to face first impressions (in person or virtually) can help discard or choose the right candidate.
Skipping this process or rushing when in need to fill a vacancy may save time and money initially but could cost you significantly in the long run.
Regulations and the Rental Contract Trap
Spanish rental laws are highly protective of tenants, and this is something property owners must know before investing.
While this regulation provides security for families and long-term residents, it can lack flexibility from the owners’ point of view.
For example, depending on the location, there might be limitations to rent increases when renewing a long-term rental contract, and tourist rentals might require additional paperwork.
Always check first the minimum legal duration of the contracts and make sure you agree with all the clauses and check they abide by the law before signing.
Rent Guarantee: Worth It?
Even with careful screening, there is always a risk that a tenant may default. This is where rent guarantee insurance becomes a key safeguard. A rent guarantee covers unpaid rent for a set period, giving landlords peace of mind and financial stability.
It’s important to select a reliable provider, as the terms and coverage vary widely. For property investors in Spain, Just Insurance is a reliable insurance broker that helps you find the best provider and insurance policy according to your specific needs. Take advantage of having a local partner with deep knowledge of the market and property regulations.
While rent guarantee might feel like an additional cost initially, it could save you thousands of euros and protect your investment.
Who Should You Trust Locally?
Foreign investors often underestimate the importance of local expertise, and this is another risk they often face. Knowing the local market is crucial when making the right decisions and protecting an investment, even more in countries like Spain, when regulations vary drastically from one region to another.
Hiring the right professionals reduces the likelihood of costly mistakes and ensures a smoother management of your investment.
Insurance Decisions That, if Made Now, Will Save You Trouble in the Future
Property investment is not only about securing rent, you have to think about protecting the asset as well. Fires, floods, theft, and even liability claims from tenants or neighbours can lead to severe financial loss. Without proper insurance coverage, these risks fall entirely on the investor.
Getting the assessment from a local insurance broker, with broad experience in the rental market might help you find the best options. The most common types of insurance coverage to consider include:
- Building insurance. Covers structural damage to the property, relates to the continent.
- Contents insurance. Essential if you rent a furnished property, it covers what is inside the house.
- Liability coverage. Protects against claims from tenants, neighbours or visitors who might suffer injuries related to your property.
- Rent guarantee insurance. As mentioned earlier, for financial stability.
Depending on your property and specific needs, you might benefit from getting all of the above or just some of them, and you might also want to go into further detail in order to design a tailor-made insurance plan to get the coverage you need at the best price.
To achieve so, Just Insurance is the right partner, working with the best insurance providers in Spain and with a vast knowledge of the most common property investors’ needs. The best strategy is to anticipate risks before they become problems. Get the right insurance and make the most of your investment with peace of mind.
