At Blue Key we help foreigners buy an apartment in Valencia. How to make money on rentals in Valencia? That is the exact question that we are going to answer in episode 3 of “How to buy an apartment in Valencia”.
This article is the 3rd episode of a serie of 4 articles about how to buy an apartment in Valencia. Previously we talked about “how to search for an apartment in Valencia”, and about “legal assistance during the buying process“, and why you need a lawyer in Valencia. In this episode we explain “how to make money on rentals in Valencia”, and in the 4th episode we will talk about “how to manage your property“. Stay tuned!
Return on investment in Valencia
Purely from an investors perspective Valencia is probably not the most profitable place to buy in Europe. Most foreign investors who buy an apartment in Valencia do it for the same reason: To have a “pied-à-terre” in one of the most beautiful cities in Europe. Rarely people buy with the sole intention of making money. Most investors buy partly because of sentimental reasons, because they fell in love with the city.
Often buyers want to achieve the perfect balance between having an apartment for personal use (holidays in Valencia) and obtaining a rental income. And that is possible, if you buy the right apartment, and partner up with the right rental company. But before even thinking about making money with rentals it is crucial to fully understand the rental market in Valencia: the different types of rentals that coexist and the rights and obligations of both tenant and owner.
How does the rental market in Valencia work?
In Valencia, as in most major cities in Europe 3 types of rentals coexist: Traditional long term unfurnished rentals, mid-term (3-11 months) furnished rentals and short term holiday rentals. The holiday market is clearly saturated and practically dead in these coronatimes. Traditional rentals scare many apartment owners because of potential payment problems and the risk of a bad tenant (with no way of kicking him out).
More and more apartment owners in Valencia are therefore choosing for mid-term rentals and are renting to expats. Are mid-term rentals exclusive for expats? No, of course not. Not only expats are looking for mid-term furnished rentals, but the growing trend of global mobility is increasing the demand for flexible housing. What we have learned in 2020 is that “remote working” is feasible and widely introduced in many industries. This opens up a lot of opportunities for young professionals. It has become much easier for them to work remotely so they can decide where to live. And what place is a better place to live than Valencia? In the Globexs blog we already talked about the 10 reasons why Valencia is the best destination in Spain for teleworkers.
At Blue Key we are convinced that mid-term expat is the best rental formula because it gives maximum profit and minimum risk, if well managed by a professional agency such as Globexs.
What are expat rentals (mid-term rentals)?
Expats are foreign professionals. They move to a new city for a certain period (usually between 1 and 11 months) for a project or an assignment, or simply because they want to breath a fresh air (and their location independent job allows that).
Expat (mid-term) rentals have the following characteristics. They are shorter (1-11) rentals of fully furnished rental apartments. The tenants sign a rental contract with flexible cancellation terms, but is not allowed to use the property as his official address (“empadronamiento” is not allowed). Usually the tenant pays 1 bill and all expenses are included in the rental price. Expat rentals are usually managed by a specialised agency such as Globexs.
The advantages of expats rentals in Valencia
They are the perfect tenants for a number of reasons. After all, expats and digital nomads are the ambassadors of progress.
- Minimum risk of payment problems.
- The owner keeps the control over the apartment.
- The rent is much higher than traditional rent.
- Tenants are usually very educated people who take care of the apartment.
- The owner can use his apartment whenever he wants (for example to spend his holidays).
- Owners feel the satisfaction of actually helping expats settling in.
The disadvantages of expats rentals
First of all, as a property owner you need to find a good agency that handles your apartment. Expats are “high-maintenance” that require attention. After all, the apartment is fully furnished and things break. The owner (or the agency that handles the rental) needs to be on top op things. If you are a foreign investor and you do not live in Valencia it is almost inevitable to hire a professional agency. Most rental agencies charge the owners a percentage of the rent. This is not the case at Globexs. Globexs charges his agency fee to the tenant, not to the owner.
Expat rental apartments are fully furnished apartments, with everything provided such as plates, glasses, towels, bedlinen etc. These things break or need replacement. That is an expense that the owner has to take into consideration. This stresses again the importance of a good property management company. The property management of the Globexs apartments in Valencia is done by Nestor. In the 4th episode we will talk more into details about “how to manage your property“.
Another disadvantage of expats rentals is the uncertainty regarding the occupancy rate. Before the COVID-crisis Globexs was reporting excellent occupancy rates of 10,5 – 11 months per year. Expats usually stay between 3-6 months in Valencia which means that an apartment receives 2-3 tenants every year. Between each tenant the property management company has to clean the apartment, wash the linens and do maintenance tasks. A 100% occupancy rate is therefore impossible. That is why expat rental prices are high: Tenants also pay for the months that the apartment is not rented.
I want to rent to expats, how to get started?
Great idea! Once you have decided that expats are the best possible tenants for your still-to-buy apartment, you get in touch as soon as possible with the people behind Globexs / Blue Key. They will advice you on the following matters:
What kind of apartment should I buy?
This is a no-brainer: You need to buy an apartment with an outdoor space. Foreigners are moving to Valencia for the climate and almost without exceptions are seeking an apartment with a terrace or balcony. Having an outdoor space is more important than other factors such as an elevator, 2 or 3 bedrooms, etc.
What are the best areas to buy?
In the first episode “how to search for an apartment in Valencia” we already touched this subject. In the Globexs blog you can find a treasure of information about where to live in Valencia, of the best areas to live in Valencia as an expat.
How do I furnish and decorate the apartment?
Once you have bought an apartment you need to prepare it. Expat rental apartments are fully furnished and equipped. Most of the Globexs / Blue Key customers are foreigners that do not live in Valencia and they hire Nestor to decorate and furnish the apartment.
How much money can I make with expat rentals in Valencia?
Most apartments on the expat rental market, of a normal size (80-100m2), in a normal neighbourhood, of a normal quality, generate between 1000€ – 1500€ rental income for the owners. Indeed, this is higher than what traditional rentals generate, but the occupancy rate is never 100%.
In pre-corona times apartments on the mid-term rental market had an average occupancy rate of 10,5 months/year. For 1,5 months a year the apartment does not generate an income. And… stuff breaks. Because the apartments are fully furnished the owners have to bear the costs of bed linen and towel changes, missing kitchen items, etc. This explains why expat rental prices are about 40-50% higher than traditional rental prices.
Is covid-19 having a big influence?
Yes, without any doubt. At the moment of writing this article (October 2020) the expat rental market is going through an obvious crisis. There are few or no foreigners arriving in Valencia and the offer has increased drastically. Most Airbnb apartment owners are now also looking at the expat market, which creates a price pressure. It is too soon to tell how the situation will evolve but rental prices and occupancy rates are going down at the moment.
Globexs, the best expat rental agency in Valencia
Since 2010 Globexs is dedicated to helping expats and digital nomads moving to Valencia with a wide range of relocation services including legal immigration assistance, (co)working spaces, and housing solutions. Globexs has become the industry reference for expat rentals in Valencia and other cities in Spain, France, Belgium and Holland.
Globexs does more than housing. It has become a platform where people can exchange useful information for expats and digital nomads in Valencia The Facebook group “expats living and working in Valencia” is a meeting point for newly arrived and established expats.
Why foreign investors prefer Valencia over Madrid or Barcelona
At Globexs / Blue Key we have written several articles already comparing Valencia to Madrid or Barcelona. Personally I am still convinced that Valencia is the best place to invest in Spain, because it is simply the best place to live in Spain. Of course that is a very personal opinion, and we totally respect people who disagree with this. We are also very fond of the north of Spain, and we love Gijon and Bilbao. They are great cities with lovely people but the weather is not great. Valencia seems to have it all: Metropolitan city, low crime, beaches, fabulous climate, large expat community, reasonable property prices, etc…
In this Blue Key blog you can read the article “Why foreign investors prefer Valencia over Madrid or Barcelona“, in which Clive Welland talks about the property prices, the local government and main attractions in Valencia. One of the most popular Globexs blog posts is “Why is it better to live in Valencia than in Madrid or Barcelona“. This article was first published in 2017 and updated in 2020. Another popular post talks about the “Pros and cons of moving to Valencia“.
The full circle
At Blue Key we help foreigners buy an apartment in Valencia. We close the circle for foreign investors with a customised service from A to Z.
1. Property search: We explain to our customers how to buy an apartment in Valencia. We explain the process and the steps to follow. We guide you in your search and tell you which areas to prefer or avoid, and we give you an idea of potential rental income.
2. Legal assistance: Our lawyers guarantee a minimum risk investment. You need an independent lawyer in Valencia when you buy an apartment. At Globexs / Blue Key we are independent from all real estate agencies and therefor we are in the best position to cover your back and minimise the risks.
3. Return on Investment: Gobexs’ core-business are mid-term expat rentals. Once you have bought an apartment in Valencia we can offer it to potential tenants and give you a decent return on investment.
4. Property management: We maintain your apartment in Valencia in perfect conditions, even if you do not use our rental services. Our sister company Nestor is a property management company that handles cleaning, maintenance works and decoration of apartments in Valencia.
Get in touch with Globexs / Blue Key
It is easy to get in touch with us for advice on rentals in Valencia: Send us an email to firstname.lastname@example.org, or simply pass by our office in Ruzafa (Calle Pintor Salvador Abril 35, Valencia).