Renting: Another Option for Investment for Foreign Nationals in Spain

Act 14/2013 on Support to Entrepreneurs and Internationalization (the Act) became effective on September 28, 2013. The Act gives foreign investors the opportunity to live in Spain. Obtaining this residence permit is very advantageous for non-European citizens, and this permit allows them to circulate freely in Member States of the Schengen Area for three months within a maximum period of six months. Additionally, it offers the possibility for the foreign investor’s spouse and minor (under 18) or incapacitated children to obtain the same permit.

The Act includes different possibilities for the foreign nationals’ investment, among which we highlight investment property. It is an excellent moment to invest in this sector in Spain. In fact, in Spain currently foreign investors acquire one out of six properties.

This residence permit’s particularity is that, contrary to other permits, the foreign investor does not have to reside in Spain. This means that foreign nationals can make a simple investment, defined as a second residence, for property that the foreign investor can rent instead.

Renting as a way of investing represents two advantages: on the one hand, it provides a steady income stream to the foreign investor. On the other hand, the value of the property could appreciate. After the burst of the property bubble that occurred in Spain in 2006, the prices of the real estate sector dropped notably. This situation now favors the status of current foreign investment.

Simultaneously, this sector currently presents a rate of profitability suitable for renting. According to the Bank of Spain, the gross profitability of rentals is 4.6% on average and reaches 8% in quarters with a higher demand for rental.

Cities like Madrid or Barcelona, with an important tourist activity, have numerous neighborhoods where renting offers a high profitability and attracts a significant amount of foreign investors.

Hélène Dagousset

This article is not considered as legal advice