Long-let or holiday-let for passive income?

Long-let — every time — if 'passive' is the priority. Holiday-let has higher gross yields but the operational load is real, even with a manager. Most investors who started with holiday-lets eventually convert at least part of the portfolio back to long-let.

Should I incorporate?

Around €600k–€800k of property value or 3+ units, the corporate-tax advantage of an SL begins to outweigh the €1,500–€2,500/year accounting overhead. Below that, personal name is usually simpler.

What's the biggest mistake in scaling?

Buying property #2 and #3 in the same town as #1. Concentration risk on local demand and local regulation is the most common reason portfolios under-deliver.

Passive income

Real-Estate Cashflow on the Costa Blanca

Property remains the single largest source of passive income for foreign residents in Spain. The framework that separates a 4% gross yield from a sustainable 5%+ net cashflow is rarely about the property — it's about portfolio shape, financing, tax structure and management discipline.

Last updated 1 June 2026

From gross yield to net cashflow

Line item	Long let	Holiday let
Gross rental yield	5.0%	7.5%
Vacancy / void	-0.3%	-1.0%
Management fee	-0.4%	-1.6%
IBI + community + insurance	-0.5%	-0.7%
Maintenance + capex reserve	-0.5%	-0.8%
Spanish tax (EU non-res, 19% on net)	-0.5%	-0.6%
Net cashflow yield	~2.8%	~2.8%

Leverage is the multiplier

At 60% LTV / 3.8% mortgage, net cashflow yield on equity roughly doubles to 5.5–6%. Add 2–4% expected capital appreciation and total levered return reaches 8–10% per year — the actual reason property dominates passive-income portfolios here.

Portfolio shapes that work

✦Single-asset starter: one 2-bed in Alicante centre or Torrevieja, 60% LTV, long-let. Cashflow ~€350/month on €60k equity.
✦Three-property core: two long-let apartments + one holiday-let villa across Alicante / Torrevieja / Calpe. ~€180k equity, ~€1,500/month net.
✦Yield-tilted: 4–6 small apartments (€110–€160k each) across Alicante and Torrevieja for stable long-let income; minimal capital growth, maximum cashflow.
✦Growth-tilted: 2–3 premium villas (Moraira, Jávea) holiday-let; lower yield, higher appreciation, requires hands-on management.
✦SL (limited company) structure: triggers around 3+ properties or €1M+ value — corporate tax 25% beats personal 30–47%, IVA on costs reclaimable.

Financing as a cashflow lever

Non-resident mortgages: 60–70% LTV at 3.2–4.1% fixed (mid-2026). Resident mortgages reach 80% LTV at 3.0–3.8%. Stress-test cashflow at 1.5× the contractual rate — current rates are not the long-term average.

Interest is deductible against rental income for EU residents and Spanish-resident landlords (not for non-EU including UK/US since 2021). Plays a major role in pre/post-tax cashflow modelling.

Operational discipline

✦Treat each property as a P&L with monthly review — not 'an investment'.
✦Reserve 8–10% of gross rent for maintenance and capex; underfunded reserves are the slow-acting yield killer.
✦Use a Spanish agent for tenant placement and contract — DIY foreign landlords routinely fall foul of LAU rules.
✦Bill in EUR via a Spanish current account paired with the IBAN tenants pay into — avoids end-of-year reconciliation headaches.
✦Annual rent reviews indexed to the reference index — failing to index loses 1–2% per year permanently.

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Market-wide property analysis.

Buy-to-let

Long-let property investing.

Investor taxes

Modelo 210 and SL structures.