Investment · 7 min read
Earning Rental Income from Your Costa Blanca Property
10 February 2026 · Hansson & Hertzell
How to turn your Spanish property into an income-generating asset — tourist licenses, management, pricing, and realistic yield expectations.
Spain's Costa Blanca has long attracted European buyers chasing sunshine and lifestyle — but in 2026, a growing share of purchases are driven by something more concrete: rental yield. With tourism to the Alicante province hitting record levels and long-term rental demand surging among digital nomads and EU relocators, the numbers are increasingly hard to ignore.
This guide breaks down what properties are genuinely earning on the Costa Blanca, which locations perform best, how to structure a compliant rental operation, and what your realistic net yield looks like after Spanish taxes and costs.
---
The Rental Market in Numbers
The Costa Blanca recorded over 11 million tourist arrivals in 2025 according to the Alicante Tourism Board, with average occupancy rates for holiday rentals running at 68% annually — higher in peak summer months when demand from Northern Europe spikes sharply. The region's appeal is durable: 320 days of sunshine, Alicante Airport's extensive low-cost connections to Northern Europe, and a well-established international community that makes it easy for new arrivals to settle.
Long-term rental demand has grown even faster. The Valencian Community saw a 22% rise in residential rental demand between 2023 and 2025, driven by an influx of remote workers, retirees, and mid-term corporate tenants from Germany, the Netherlands, and the UK. Supply has not kept pace: vacancy rates in well-positioned properties now sit below 3% in most established urbanisations.
Average gross rental yields by area (2025–2026 data):
| Area | Property Type | Gross Yield | |------|--------------|-------------| | Torrevieja | 2-bed apartment | 6.8–8.2% | | Orihuela Costa | Beachfront villa | 5.5–7.0% | | Benidorm | Studio / 1-bed | 8.0–10.5% | | Altea | Boutique villa | 4.5–6.0% | | Javea | 3-bed detached | 5.0–6.8% | | Ciudad Quesada | Community bungalow | 5.5–7.2% | | Calpe | 2-bed apartment | 6.0–7.5% |
Note: these are gross yields before management fees, maintenance, taxes, and community charges. Net figures are meaningfully lower — the full breakdown follows below.
---
Holiday Rentals vs Long-Term Rentals
The first strategic decision every Costa Blanca investor faces is whether to target holiday (short-term) rentals or long-term residential tenants. Both work — but they serve very different investor profiles and come with very different operational demands.
Holiday Rentals
Short-term holiday letting generates the highest gross income per night, particularly in peak season (July–August) and the shoulder months of June and September. A quality 2-bedroom apartment in Torrevieja can command €900–€1,200 per week in peak season, with annual rental income of €18,000–€26,000 from 20–26 weeks of bookings.
What you need to operate legally: A tourist rental licence (licencia de arrendamiento turístico) issued by the Valencian Government is mandatory. Applications are processed through the Conselleria de Turisme and typically take 3–6 months. You also need registration with the local Town Hall, compliance with minimum quality standards (fire extinguisher, first aid kit, complaint forms, specified minimum equipment), and quarterly tax filings with Hacienda.
Costs to factor in for holiday rentals:
- Platform fees (Airbnb, Booking.com): 15–18% of booking revenue
- Local management company: 20–30% of gross revenue (essential unless you live locally)
- Cleaning between guests: €60–€120 per changeover
- Welcome pack and consumables: €15–€25 per guest stay
- Maintenance fund: budget 1–1.5% of property value annually
- Community fees, IBI, insurance, utilities (owner pays during vacant periods)
After all costs, net yield on a well-managed holiday rental typically runs 4.5–6.5%, with the best-located properties in high-demand zones occasionally reaching 7%.
Long-Term Rentals
Long-term rental (12-month contracts) offers lower gross income but significantly lower operational overhead. No platform fees, no cleaning costs between tenants, no tourist licence requirement, and a predictable monthly cash flow. The Valencian Community's Urban Rentals Law provides reasonable protections for landlords on lease renewal terms.
In 2026, long-term rental demand on the Costa Blanca is extremely strong. A 2-bedroom apartment in Ciudad Quesada that rented for €650/month in 2022 is now achieving €850–€950/month. The digital nomad and corporate relocation market has created a growing tier of mid-term furnished tenancies (3–11 months) at rates above standard long-term but below holiday rental peaks — often the best of both worlds for owners who want professional tenants without the management intensity of nightly changeovers.
Net yield calculation for a long-term rental:
| Item | Annual Amount | |------|--------------| | Gross rent (2-bed, €900/month) | €10,800 | | Community fees | -€1,200 | | IBI (property tax) | -€400 | | Property management (8–10%) | -€900 | | Insurance | -€350 | | Maintenance allowance | -€500 | | Net operating income | €7,450 |
On a purchase price of €145,000, that represents a net yield of 5.1% — before income tax but after all running costs.
---
Spanish Income Tax on Rental Income
This is where many foreign investors are caught off guard. Spain taxes rental income differently depending on your tax residency.
EU/EEA residents can deduct expenses against rental income: mortgage interest, maintenance, management fees, depreciation (3% of construction value annually), insurance, IBI, and community charges. The net income is taxed at a flat rate of 19%. For EU buyers with significant deductible expenses, the effective tax rate on gross income can be 6–10%.
Non-EU residents (UK buyers post-Brexit, US buyers, Australian buyers) are subject to a stricter regime: income tax at 24% on gross rental income with no deduction of expenses. This significantly erodes net yield.
Practical example: A UK buyer earns €12,000/year in gross holiday rental income. Under Spanish IRNR rules, they pay 24% on the full €12,000 = €2,880 in tax. An EU buyer with the same income and €6,000 in deductible expenses pays 19% on €6,000 = €1,140 in tax — less than 40% of the non-EU buyer's liability.
This structural tax difference often makes long-term rental strategies more attractive for non-EU buyers, where costs are more predictable and income is steadier.
---
Which Properties Make the Best Rental Investments
Based on the transaction data and rental performance we track at Hansson & Hertzell, these property profiles consistently deliver the strongest risk-adjusted returns:
1. 2-bedroom ground-floor apartments with private garden, Torrevieja / Orihuela Costa Price range €120,000–€180,000. Strong demand from both holiday and long-term tenants. Private gardens are highly valued — retiree and family renters pay a meaningful premium over upper-floor equivalents. Gross yield: 7.0–8.5%.
2. Community bungalows in Ciudad Quesada / Rojales Price range €145,000–€220,000. Popular with longer-stay Northern European retirees (3–6 month winter and spring rental contracts). Low maintenance costs, active community management. Gross yield: 6.0–7.5%.
3. Penthouse apartments with sea views, Calpe / Benidorm Price range €200,000–€380,000. Command premium nightly rates in summer. Lower occupancy in winter due to higher price point. Gross yield: 6.0–8.0%. Capital appreciation historically strong in prime coastal locations.
4. Modern new-build 3-bed villas, inland urbanisations Price range €320,000–€500,000. Growing demand from corporate and digital nomad tenants. 12-month furnished contracts at €1,800–€2,500/month increasingly common. Gross yield: 5.5–7.0%. Energy efficiency ratings (A or B) are increasingly demanded by quality tenants and may become a regulatory requirement in the coming years.
---
Setting Up a Compliant Rental Operation
Apply for the tourist licence early. Holiday rental licences in the Valencian Community take 3–6 months to process. Apply before or immediately after property completion, not when you're ready to list. Operating without a licence risks fines of up to €90,000 and platform delisting.
Use a local property management company. The difference between a well-managed property achieving 22+ weeks of bookings and a poorly-managed one achieving 12 is almost entirely the operator's quality. Interview multiple companies, check their occupancy track records and guest reviews, and understand their pricing strategy before committing.
Furnish to a high standard. Properties photographed professionally and furnished to a contemporary Scandinavian or Mediterranean standard consistently outperform dated equivalents by 25–40% on nightly rate and booking volume. The upfront investment of €12,000–€18,000 on quality furnishing pays back within 2–3 seasons.
Understand your depreciation allowance. For EU residents filing Spanish tax returns, the annual 3% depreciation on construction value is often the largest single deductible item. Many buyers miss this entirely and overpay tax for years.
File your taxes correctly and on time. Non-residents must file Modelo 210 declarations quarterly (if earning rental income) or annually (for imputed income on unrented properties). Failure to file incurs fines and interest that compound quietly.
---
Financing a Costa Blanca Investment Property
Spanish banks will lend to non-resident buyers, typically at loan-to-value ratios of 60–70% (lower than for residents). Interest rates on variable mortgages are currently linked to Euribor, which has moderated from its 2023 peak. Fixed-rate mortgages are available from major Spanish banks (BBVA, Santander, CaixaBank, Sabadell) at rates of approximately 3.0–4.2% over 20–25 years for non-residents with strong income profiles.
Key requirements for non-resident mortgage applications:
- NIE number (mandatory)
- 6–12 months of bank statements
- Proof of income (payslips, tax returns, pension documentation)
- Property valuation (tasación) by a bank-approved valuer
---
Frequently Asked Questions
Do I need a Spanish company to buy a rental property? No. Most foreign buyers purchase property directly in their own name. A Spanish Sociedad Limitada can occasionally be tax-efficient for high-value portfolios, but adds administrative complexity and cost. Discuss with a qualified gestor before making this decision.
Can I rent my property before the tourist licence is granted? For holiday rentals, no. Long-term 12-month residential contracts under Spain's Urban Rentals Law do not require a tourist licence and can begin immediately after completion.
What net return should I realistically expect? On a quality property in a good location with professional management, expect net yield of 4.5–6.5% for holiday rentals and 4.0–5.5% for long-term. Properties consistently achieving significantly more typically involve exceptional location, self-management, or optimistic cost assumptions.
How do I repatriate rental income to my home country? No capital controls restrict transfers out of Spain. Ensure Spanish withholding tax obligations are met before transferring. Your gestor or bank can facilitate routine international transfers.
Is the rental market getting more competitive? Yes. Tourist rental licences in the Alicante province grew 18% year-on-year from 2022–2025. Quality of property presentation, professional management, and accurate seasonal pricing now separate the successful investments from the marginal ones.
---
Working with Hansson & Hertzell
We work with investment buyers at every stage: identifying properties with genuine rental credentials, reviewing licence status and community finances, connecting you with trusted local managers, and helping you structure the purchase correctly from day one.
Contact us for a free investment consultation, or browse our current property listings to see what's available in your budget and target area.
Getting Started with Costa Blanca Rental Investment
The first step is identifying the right property for your target rental strategy — short-term holiday lets and medium-term winter lets have different optimal locations and specifications. Our team advises across both strategies and works with trusted property managers, accountants, and legal specialists across the costa.
Contact us with your budget and yield targets and we will identify the current opportunities that best match your profile.
