Investing in Real Estate Abroad – How to Choose Wisely to Maximize ROI

By Paul Brazell Acosta, Spanish Real Estate Expert and Director of Cloud Nine Spain 

Buying property in a holiday destination such as the South of Spain is always a good choice as an investment. These destinations allow you to generate rental income by renting short-term during the holiday season, while still having a base to explore Europe and enjoy the culture, food, and lifestyle in the off-season. They are also ex-pat havens and so have a thriving long-term rental market, if you don’t want to use it yourself right away. Post-COVID there is lots of pent-up demand for holiday rentals, so it’s an interesting time to consider investing in a property abroad. 

I have over 20 years of working in real estate in the holiday destination of Marbella on the Costa del Sol in Southern Spain and have helped hundreds of people buy investment properties. In this article, I want to guide you through a few things to think about when choosing a property for rental and offer you some tips for maximising rental income. 

How to Choose an International Investment Property

If your main purpose in buying this property is to generate rental income you need to be thinking with your head, not your heart. 

Normally the two gauges used to assess the suitability of an investment property will be a) the potential for capital growth and b) the potential for rental income. For investors, it should all be about the financials, the numbers. It may not even be a property that they “like” or “love”. If the figures stack up and there is likely to be a quick and easy exit strategy in the event of needing to sell, then personal taste needn’t play a part in the decision-making process. 

Make sure your agent knows you’re planning to generate rental income from your property and that you discuss the most popular property types and the most popular locations for rental, to ensure you make the right decision. 

Location is key! The closer to the beach and amenities it is the better, as it will tick more boxes for more people. Easy access to the airport, and to public transport, will also give you an advantage over more isolated properties. Once you’ve chosen the right location you need the right space and facilities in the development to give you more selling points to set you apart.

Problems can arise if buyers are looking to purchase a holiday home that they intend to use for part of the year themselves, but with which they also want to earn a decent rental income. In this highly common scenario, there is often a conflict between head and heart as the criteria for investment and personal enjoyment both need to be met. 

As in all property purchases, a degree of compromise needs to be factored in. After all, buying a property that will appeal to the mass rental market may not necessarily accord with your own personal wish list. For instance, buyers may like the idea of owning a holiday home in the hills, surrounded by nature, but is this the sort of place that would appeal to holidaymakers looking for a family holiday in the sun? A balance that satisfies both financial and emotional needs is often hard to find, but an experienced agent with plenty of local knowledge should be able to guide and assist in cases like this.

How to Maximise Your Property’s Rental Potential 

Once you’ve got a good property in a great location you need to make sure your marketing is spot on and get the price right. 

The short-term market in holiday destinations like Marbella is highly competitive. This means you’ve got to have your property stand out in terms of presentation, and location and it’s got to be priced correctly. Check similar properties online and where they are pricing themselves. If you can be slightly lower than the majority of your competition and still make an attractive return, then you are likely to be fully booked. This is a good idea when you get started so you can improve your ranking in listings, get reviews and create a strong platform to build on. If you’re not willing to reduce your price, then it will take longer to gain momentum and have consistent bookings throughout the holiday season (April to September).  

Another way to stand out is to tick as many boxes as possible for your guests, present your property beautifully and make sure you definitely offer international TV and high-speed internet. Remember, that people may still need to work while they are on holiday and kids like to stream their favourite shows or video chat with friends, so WIFI throughout is essential.  

Once you have a good price and a property which is well presented and has all the key points that rental clients are looking for, it’s all about the marketing. Make sure you have professional images taken, with the property looking its very best, as this will make it stand out online. 

Deal with a rental agency that promotes the property in as many geographical areas as possible and that they are listing them on rental portals such as bookings.com, Airbnb, etc. Ask them if they are also marketing it to their database of clients and being proactive to find you tenants. Also, make sure you tell people about your property, and promote it to your network of family and friends in person and on social media – you never know where bookings will come from! 

Consider Long-Term Rentals 

As I mentioned, short-term rentals are highly competitive and very seasonal, so if you’re not using your property yourself in the low season, it can be sitting empty for long periods of time. There are also regulations you have to comply with when renting short term and you must have a certificate to allow them to be rented. Like hotels, holiday rental owners need to ensure their guests fill in a form, take copies of their passports and register them at their local police station. Although most property management professionals will do this for you, this has put off some people from continuing with their short-term rentals. 

However, the long-term rental market is very strong, with a shortage of properties and high demand pushing prices up. COVID and remote working has encouraged more people to take the plunge and relocate to sunny places like the Costa del Sol. Many of these people want to try before they buy, so long-term rentals are really popular right now. 

Although you’ll have to wait to use it yourself for a while, and the returns aren’t as high per week, it’s an excellent source of steady income, with little work required. If you have a good agent, your marketing is strong and the price is right, you should have little trouble finding a long-term tenant.  

As a rule of thumb, a property for long-term rental will attract approximately the same revenue per month as a property for short-term rental would attract per week. So, if your apartment fetches €1,000 per week in August as a holiday let, it is likely to also achieve a monthly rental figure of €1,000 if let on a long-term basis. 

Long-term rental provides consistency and reliability of income levels throughout the whole year, there are no changeover/cleaning costs to pay to a management company after each guest leaves, and the tenant usually pays the utility bills. In these uncertain times, this could be just what you need to continue to make money from your property without stress. 

Conclusion

With the high demand for holiday rentals caused by travel restrictions easing and a shortage of good-quality, well-furnished homes available for long-term rental, there are genuine opportunities for real estate investors on the Costa del Sol and in other holiday destinations around the globe. 

The key, as always, is to purchase in the right locations – ideally close to amenities – and to ensure that community fees don’t eat into your profit margins too much (in Spain, the landlord pays these fees!). An experienced real estate professional will be able to guide investors toward the best opportunities and provide income and cost estimates to assist with budgeting forecasts.

Author Details

Paul Brazell Acosta is a Spanish Real Estate Expert, originally from America, but raised in Spain. He currently lives in Marbella on the Spanish Costa del Sol, with his wife and two teenage children and is Director of realtors Cloud Nine Spain. He helps international buyers purchase property in Spain and unlock the incredible lifestyle he loves so much. 

Paul was born in California, to an American Father and a Spanish Mother, but raised in Madrid Spain from the age of 7. His father was a U.S. Air Force fighter pilot, based at Torrejon Air Force Base in Madrid and so he grew up in the Spanish capital and has dual nationality. Despite having tried to move back to the US on various occasions, his Spanish blood keeps bringing him back and he has lived in the Marbella area in the South of Spain since 2002. 

Having worked in Advertising Sales in Madrid, owned a pizzeria restaurant in Madrid, and as a newscaster in Reno Nevada, he started working in Real Estate when he moved to Marbella in 2002 and has never looked back. As a Director of Cloud Nine Spain, he loves to be able to help people looking for property throughout their search. He is passionate about the incredible lifestyle that the Costa del Sol has to offer international buyers and loves to help people find their perfect property.