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Renting property as a retirement income

Posted: Sat Feb 13, 2021 6:13pm
20 replies1481 views13 members subscribed
Sophielucy

Posts: 38

6 helpful points

Location: Villamartin

Joined: 15 Jul 2020

Hi, has anyone on this forum rented property as a business venture? My husband and I have bought 1 apartment and thinking of buying more to have a passive income in retirement. This would mean we could retire sooner but just terrified to take the leap of faith. It wouldn’t be till next year but just wondered if anyone had managed to live on the income. We both have jobs in Scotland but thinking life’s too short. We watch all the holiday programmes like Life in the Sun and think we could do that. We already rent out property in Scotland and we are aware of costs but if we sold up here we would be mortgage free for coming over so any money made minus costs and tax would be our income. Any advice from experience or knowing someone who has done the same would be greatly appreciated. 

Cheers

Liz 

Golandrina

Posted: Sat Feb 13, 2021 7:19pm

Golandrina

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Posts: 1633

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Location: Almoradí

Joined: 24 Mar 2018

Posted: Sat Feb 13, 2021 7:19pm

Depending upon the type of rental that you envisage you may need to have a licence.   I would suggest that you have a look at the Tips and Guides on this site as well as having a look at the Citizens Advice Bureau Spain website.   After the 1st January this year it is not as easy to move to Spain as it used to be as the UK is now classed as a Third Country due to no longer being in the EU.

Sophielucy

Posted: Sat Feb 13, 2021 8:06pm

Sophielucy

Original Poster

Posts: 38

6 helpful points

Location: Villamartin

Joined: 15 Jul 2020

Posted: Sat Feb 13, 2021 8:06pm

Golandrina wrote on Sat Feb 13, 2021 7:19pm:

Depending upon the type of rental that you envisage you may need to have a licence.   I would suggest that you have a look at the Tips and Guides on this site as well as having a look at the Citizens Advice Bureau Spain website.   After the 1st January this year it is not as e...

...asy to move to Spain as it used to be as the UK is now classed as a Third Country due to no longer being in the EU.

Yes I know all the rules like tourist licence and I know it will be different after Brexit to become resident. I’m just wondering if people have experience they can share with me.

Kelvin1960

Posted: Sat Feb 13, 2021 8:35pm

Kelvin1960

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Posts: 1488

1767 helpful points

Joined: 5 Mar 2017

Posted: Sat Feb 13, 2021 8:35pm

An idea .... leave your rental property in the UK (as we do).

You already understand the legislation, expenses etc., and you already own the property.

There are some tax issues to get your arms around, but the key point is that the asset stays in the UK, where it is more readily realisable. 

Sophielucy

Posted: Sat Feb 13, 2021 10:06pm

Sophielucy

Original Poster

Posts: 38

6 helpful points

Location: Villamartin

Joined: 15 Jul 2020

Posted: Sat Feb 13, 2021 10:06pm

Kelvin1960 wrote on Sat Feb 13, 2021 8:35pm:

An idea .... leave your rental property in the UK (as we do).

You already understand the legislation, expenses etc., and you already own the property.

There are some tax issues to get your arms around, but the key point is that the asset stays in the UK, where it is more readily realisable. 

Hi, why would I leave my rental property in the uk when I have money tied up in it and need to release equity to buy in Spain? I thought it would be cleaner to move everything to Spain then if anything goes wrong we r in the country. More money to b made renting out to holidaymakers rather than long term in the uk I would think?

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JaneC

Posted: Sat Feb 13, 2021 10:26pm

JaneC

Helpful member

Posts: 86

72 helpful points

Location: Torrevieja

Joined: 25 Jan 2019

Posted: Sat Feb 13, 2021 10:26pm

Sophielucy wrote on Sat Feb 13, 2021 10:06pm:

Hi, why would I leave my rental property in the uk when I have money tied up in it and need to release equity to buy in Spain? I thought it would be cleaner to move everything to Spain then if anything goes wrong we r in the country. More money to b made renting out to holidaymakers rather than l...

...ong term in the uk I would think?

Rental income in the UK remains taxable in the UK for Spanish residents under the taxation rules between UK and Spain, so this might be an option for you, as you then still have your personal allowance in Spain for any rental income in Spain. You make the best use of personal allowances in both Spain and UK, we do this currently. 

dinnerout

Posted: Sat Feb 13, 2021 11:14pm

dinnerout

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Posts: 2181

2422 helpful points

Location: Beniarbeig

Joined: 18 Sep 2015

Posted: Sat Feb 13, 2021 11:14pm

Sophielucy wrote on Sat Feb 13, 2021 6:13pm:

Hi, has anyone on this forum rented property as a business venture? My husband and I have bought 1 apartment and thinking of buying more to have a passive income in retirement. This would mean we could retire sooner but just terrified to take the leap of faith. It wouldn’t be till next year but...

... just wondered if anyone had managed to live on the income. We both have jobs in Scotland but thinking life’s too short. We watch all the holiday programmes like Life in the Sun and think we could do that. We already rent out property in Scotland and we are aware of costs but if we sold up here we would be mortgage free for coming over so any money made minus costs and tax would be our income. Any advice from experience or knowing someone who has done the same would be greatly appreciated. 

Cheers

Liz 

I have a one bedroom second property with a Valencia Tourist Licence that I let out, and I'm very familiar with the lettings/rental market.

There's a lot I could say, but the most important things are these:

1 it would in my opinion be a very high risk strategy and perhaps even a little foolhardy to rely on rental income from rental of one property as a means of supporting living costs in Spain. I doubt that a one bedroom property could deliver more than 10.000 euros annually in top line rental income.

2 even high occupancy rental properties like mine have a cost base commensurate. That is to say, you cant rely on the INCOME, you would be relying on the PROFIT, two very different things. For example in my third year when I let for 42 weeks out of 52 my washing machine at home was never off. That's before the costs actually at the property of electricity water gas IBI insurance cleaning materials repairs maintenance community fees etc etc.... plus tax payable after allowable deductions.

I made my move to Spain with rental income as part of my overall income requirement before my pensions kicked in and that was successful but I had a bank of savings to rely on before those pensions made up the shortfall. If your pensions are on the horizon then I would say it's a reasonable strategy to reduce drain on savings until your pensions arrive, but be aware the cost of living in Spain isn't cheap.

I don't want to discourage your dream, but if you want any advice I'm happy to offer it. I provide my listing below not as an advert purely as an example so you can see high season potential.

My listing on Booking.com

Kind regards, Steve

Kelvin1960

Posted: Sun Feb 14, 2021 12:03am

Kelvin1960

Super helpful member

Posts: 1488

1767 helpful points

Joined: 5 Mar 2017

Posted: Sun Feb 14, 2021 12:03am

Sophielucy wrote on Sat Feb 13, 2021 10:06pm:

Hi, why would I leave my rental property in the uk when I have money tied up in it and need to release equity to buy in Spain? I thought it would be cleaner to move everything to Spain then if anything goes wrong we r in the country. More money to b made renting out to holidaymakers rather than l...

...ong term in the uk I would think?

Cost of selling in the UK.

CGT in the UK.

You understand the rules in the UK.

The UK market is under-supplied. Rental income is firmer.

You probably don't understand the nuances in Spain.

Not all properties in Spain can get a holiday let licence (the market is oversupplied)

Cost of buying in Spain (around 13%).

Income tax in Spain (vs tax allowance in UK).

Poor % returns on rentals (the market is oversupplied with many empty properties)

If you decide to sell in Spain, 7% costs, plus it could take ages, plus tax.

These are good reasons to do your sums and look at the option of leaving your investment asset(s) in the UK. If you simply sell up in the UK, pay CGT in the UK, then pay 13% purchase costs in Spain, you are probably throwing away 20% of your investment pot before you get a single Euro in income. 

dinnerout

Posted: Sun Feb 14, 2021 12:09am

dinnerout

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Posts: 2181

2422 helpful points

Location: Beniarbeig

Joined: 18 Sep 2015

Posted: Sun Feb 14, 2021 12:09am

Kelvin1960 wrote on Sun Feb 14, 2021 12:03am:

Cost of selling in the UK.

CGT in the UK.

You understand the rules in the UK.

The UK market is under-supplied. Rental income is firmer.

You probably don't understand the nuances in Spain.

Not all properties in Spain can get a holiday let licence (the market is oversupplied)

Cost of buying in Spain (around 13%).

Income tax in Spain (vs tax allowance in UK).

Poor % returns on rentals (the market is oversupplied with many empty properties)

If you decide to sell in Spain, 7% costs, plus it could take ages, plus tax.

These are good reasons to do your sums and look at the option of leaving your investment asset(s) in the UK. If you simply sell up in the UK, pay CGT in the UK, then pay 13% purchase costs in Spain, you are probably throwing away 20% of your investment pot before you get a single Euro in income. 

And.. just to add, if you become a Resident of Spain you are taxed in Spain on all income except certain exempt UK pensions.

Aspen1992

Posted: Sun Feb 14, 2021 10:41am

Aspen1992

Helpful member

Posts: 367

319 helpful points

Location: Villamartin

Joined: 16 May 2020

Posted: Sun Feb 14, 2021 10:41am

Hi Sophielucy

We looked into doing the same as your'e thinking about 10 years ago my advice would be to keep your assets where they are as Spain is a minefield of pitfalls.

The UK has a strong rental market, yes your return is less on long term but its secure and your property will increase in value generally year on year where as Spain you may aswell put the money on a roultette table and take your chances, we have 5 properties and the last thing I would do would be to sell and turn them into holiday lets in Spain, the selling, purchase & tax costs would probably take care of one of your properties then your dipping into an ocean of over subcribed market that will end up probably in a mess "In The Sun" yes but its not a forgiving place either.

My advice keep your properties in the UK down size your living accomodation and spend 6 months in the sun and a couple of months staycating that way the risk is minimal and the UK is alot more civilised with taxes and what it charges you, I am one of those that has the T-Shirt from the 80s/90s/2000 era which is painfull and it takes alot of getting back some haven't recovered, basically what I am saying is these are TV programmes with people grafting their backsides off for a better life supposedly not for me at nearly 60 I want to enjoy life not working my life away, think carefully as your'e a long time dead.

Regards

Andrew

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