Where every euro earns most on the Costa del Sol: from gross yield to real net

Two buyers complete in the same month. One puts €1,166,000 into a villa in Nueva Andalucía. The other puts €307,000 into an apartment in Manilva. On paper the Manilva buyer has done the better deal: that flat shows an estimated gross yield of 7.5% against the villa’s 4.5%. Almost double. Case closed.

Now look at the other side of the card. Manilva sells around 380 homes a year against 480 on the market: roughly fifteen months to clear the stock. When that buyer wants out, there will be a queue in front of him. And the 7.5% is not what he will bank. It is what the annual rent represents against the purchase price, before council tax, community fees, insurance, empty months, the agent who looks after the flat while he lives 2,000 kilometres away, and the Spanish tax authority. Once all of that is deducted, and if he is resident outside the European Union, he keeps 1.6%.

That drop — from 7.5% to 1.6% — is what this article is about. It is not an accounting trick or an extreme case. It is what happens to any flat on this coast once you move from the headline to the bank statement. Gross yield is the number everybody publishes because it is the only one you can calculate without knowing the owner. Net yield is the only one anybody actually receives.

Below you will find the estimated gross yield for the twelve areas we track, cross-referenced against how fast each one sells; the seven cost lines that eat the gross; why two owners of identical flats pay very different tax depending on where they live; and a euro-by-euro case study of a two-bedroom flat in Fuengirola that walks from gross to net line by line. If you are still at the earlier stage, the complete guide to buying property on the Costa del Sol and the breakdown of taxes on buying property in Andalusia come first.

What a gross yield actually measures (and why it misleads twice)

The formula fits on one line: annual rent divided by purchase price, times one hundred. A €300,000 flat let at €1,250 a month shows a 5% gross yield. It is the number in market reports and developer presentations, and it has one real virtue: you can calculate it for thousands of properties without knowing anything about their owners.

The problem is that it gets used as though it were a return. It is a price ratio, closer to a share’s price-to-earnings multiple: useful for ranking areas against each other, useless for working out what you will be paid.

The numerator: income that never arrives whole

The top of the fraction holds theoretical annual rent: twelve payments made on time by a tenant who never leaves, in a flat that needs nothing and pays no tax. That tenant does not exist.

Between the contracted rent and the money reaching your account sit seven items: IBI (the annual municipal property tax, the Spanish equivalent of council tax) and the refuse charge, the comunidad fee, insurance, maintenance, empty months, whoever manages the property, and tax. Each takes a small bite; together they take almost half.

The denominator: the price is not what the purchase cost you

Gross yield divides by the price, but you did not tie up the price. You tied up the price plus acquisition costs.

In Andalusia, resale housing is subject to Impuesto sobre Transmisiones Patrimoniales (ITP, the property transfer tax) at a general rate of 7%. Add notary fees, land registry, a gestoría to file the paperwork, a lawyer — near-universal for foreign buyers — and the cost of making the flat lettable. Invested capital lands 9%–12% above the price on the deed.

Correcting the denominator alone turns a 6.5% gross into 5.9%. You have not paid a single tax bill yet and you have already lost more than half a point.

The three numbers that mean something

• Gross yield on price. Annual rent over purchase price. Only for ranking areas against each other. It is what you will see published everywhere, ours included.
• Net yield before tax on invested capital. Rent less operating costs, divided by price plus acquisition costs. This is the one to demand from anyone selling you a deal.
• Net yield after tax. The above, less what the tax authority takes — which depends on where you live, not where the flat is. This is what you actually receive.

None of the three includes capital growth, which is not banked until you sell. When someone blends rent and appreciation into a single figure and calls it «return», ask them to separate the two.

Estimated gross yield for the twelve areas, against how fast they sell

The twelve areas we track, with average price, price per square metre, estimated gross yield and absorption. Absorption is annual transactions divided by homes on the market: above 100% the stock is clearing; below 80% it is piling up. Months of stock is the same thing expressed as a calendar.

Area	Average price	€/m²	Estimated gross yield	Absorption	Months of stock
Manilva	€307,000	€3,000/m²	7.5%	79%	15.2
Torremolinos	€315,000	€3,620/m²	7.2%	104%	11.5
Benalmádena	€349,000	€3,535/m²	6.8%	97%	12.4
Málaga City	€368,000	€3,790/m²	6.5%	74%	16.2
Fuengirola	€321,000	€3,565/m²	6.5%	95%	12.6
Nerja	€394,000	€3,915/m²	6.2%	92%	13.0
Mijas Costa	€440,000	€3,370/m²	6.0%	89%	13.4
Mijas	€448,000	€3,190/m²	5.9%	83%	14.4
Estepona	€475,000	€3,510/m²	5.8%	82%	14.7
Rincón de la Victoria	€368,000	€3,455/m²	5.8%	97%	12.4
Marbella	€913,000	€5,720/m²	5.5%	80%	15.0
Nueva Andalucía	€1,166,000	€6,160/m²	4.5%	87%	13.8

Before you read on: what this table is and is not

These figures come from the SolProp Costa del Sol Price Index (v2026.3, data to June 2026), which is our own estimate and not a record of registered transactions. It is built from asking prices and our own portfolio, not from deeds lodged at the land registry. The yield is a modelled indicator relating sale prices to reference rents for each area; it is not the return any specific property will deliver. Absorption is, for the same reason, an estimated turnover indicator.

We say this here rather than in a footnote because it changes how the table should be read. It is for ranking areas and spotting where price and rent have pulled apart. It is not for budgeting a specific purchase, and it should not be set head-to-head against figures from Spain’s National Statistics Institute or the Land Registrars’ Association, which measure different things from different sources. The full method is published at the SolProp price index methodology, and the data can be explored area by area on the interactive Costa del Sol price map.

The uncomfortable reading: the priciest, most desirable area earns the least

Sort the table by price and the yield does almost exactly the opposite. Nueva Andalucía is the most expensive of the twelve at €6,160/m² and the lowest earner at 4.5%. Marbella sits behind it on both lists. Manilva, the cheapest per metre, tops the income column.

This is not a flaw in the model. It is how residential markets behave everywhere. Rents follow local wages and use demand; purchase prices follow capital, prestige and expected appreciation as well. Once an area fills with international buyers who do not need to let it to sustain it, price pulls away from rent and the yield compresses.

Translated to this coast: an average apartment in Marbella costs €496,000 and one in Torremolinos €284,000, a 75% gap. But their rents do not differ by 75%, because a long-term tenant in Marbella does not earn 75% more than one in Torremolinos. The buyer pays that difference, not the tenant. That gap is, literally, the missing yield.

So what you buy in Nueva Andalucía or Marbella is not current income: it is international market depth, an exit buyer who does not depend on Spanish mortgage lending, and appreciation our index puts at 10.8% and 10.4%. If your aim is to be paid every month, those areas work against you; if it is to park capital in a liquid euro asset, the low yield is the entry price. Confusing the two is the most expensive mistake in this business.

The seven cost lines that eat the gross

The costs that separate gross from net on a long-term let, as a percentage of annual rent collected, for a two- or three-bedroom apartment in a building with a comunidad de propietarios — the owners’ association that runs shared areas and charges a monthly fee.

Cost line	% of annual rent	Typical annual amount	Where it spikes
IBI and refuse charge	3%–6%	€350–1,200	Recently revised rateable values and high-rate municipalities; villas pay far more than flats
Community fees	6%–12%	€700–2,400	Developments with pools, gardens, 24-hour security and lifts. Beachfront with services is the worst
Buildings and rent-guarantee insurance	2%–4%	€250–600	Rent-guarantee cover only pays for itself with a marginal tenant; adds 3%–4% of rent
Maintenance and repairs	5%–10%	€700–2,000	Pre-1990 buildings, air conditioning, damp, and salt air within 500 metres of the sea
Voids	4%–8%	€600–1,500	One empty month every two years is already 4%. More in seasonal-demand areas
Management	0%–14%	€0–2,000	8%–10% plus VAT if you delegate. Zero if you do it yourself, but only if you live nearby
Building levies and works reserve	2%–5%	€300–1,000	Façade refurbishment, lift replacement, roof waterproofing or pool works

Together these take 35%–45% of the rent. When someone shows you a gross yield, multiply it by 0.6: that is a reasonable first estimate of net before tax. A 6.5% gross is, in practice, a little under 4% before the tax authority.

The three that are always underestimated

Community fees. The most variable line, and the one that surprises foreign buyers most. In a plain block in Fuengirola with nothing but a lift, the fee might be €60 a month; in a Marbella development with a heated pool, gym, gardens and a security gate, €350 a month is normal. On a €1,250 rent that is the difference between 5% and 28%. Ask for the last three sets of minutes and the accounts before you commit: approved-but-unbilled levies show up there.

Voids. Nobody budgets for them and everybody suffers them. A tenancy that breaks in March leaves the flat idle until the next tenant appears, and in many coastal towns finding a stable tenant in July is considerably harder than in September. A 5% annual provision is prudent, not pessimistic.

Management. The quietest trap for a non-resident investor. If you live in Málaga, managing your own flat is free. If you live in Manchester or Toronto, it is not: somebody has to let the plumber in, chase a returned direct debit and attend the owners’ meeting. That somebody charges 8%–10% of rent plus VAT. Entering zero on this line because «I’ll sort it out myself» is the most common way to inflate a yield on paper.

Tax: why two owners of the same flat pay differently

This is the line that changes the outcome most and appears in return calculations least, because it does not depend on the property. It depends on where you are tax resident. Two neighbours on the same landing, letting at the same rent, can pay amounts that differ by a factor of five.

The framework is Impuesto sobre la Renta de No Residentes (IRNR, non-resident income tax), governed by Royal Legislative Decree 5/2004. Rental income from a property located in Spain is always taxed in Spain, wherever you live, and is declared on form 210. You will need a NIE — the foreigner’s tax identification number, required for any property transaction or tax filing in Spain — before any of this can happen.

Your situation	Tax and rate	Deduct costs?	On €15,000 rent with €6,220 of costs
Tax resident in Spain	Spanish income tax (IRPF), progressive	Yes: costs, depreciation, plus the residential letting relief where it applies	Depends on your other income
Non-resident, living in the EU, Iceland, Norway or Liechtenstein	IRNR at 19%	Yes: necessary expenses and depreciation, under Spanish income tax rules	Taxable base after costs and depreciation €3,632; tax roughly €690
Non-resident, living outside the EEA (UK, USA, Switzerland, Canada, UAE…)	IRNR at 24%	No. None. Taxed on gross income	Taxable base €15,000; tax €3,600

Read that last row again. A British, American or Swiss owner pays €3,600 on income from which €6,220 of costs have already gone. Real pre-tax profit was €8,780, so the effective rate on actual earnings is not 24%: it is 41%.

For British owners this is one of the most concrete financial consequences of Brexit, and it still catches out people who bought while the UK was in the EU: the post-Brexit guide for British citizens covers the rest. It affects the exit too: selling as a non-resident brings a 3% retention on the sale price and a capital gains filing.

The residential letting relief, and why it is probably not yours

A sticky idea circulates on forums and in sales presentations: «if you let it as someone’s main home, you get 60% relief on the income.» Both halves of that are out of date.

First: it is no longer 60%. Law 12/2023 on the right to housing amended article 23.2 of the Spanish income tax act and cut the general relief to 50% for tenancies signed on or after 26 May 2023, with higher bands only in defined situations: recent refurbishment of the property, letting to young tenants in officially declared «stressed» rental zones, or genuine rent reductions against the previous contract in those same zones. Earlier contracts keep the old regime. The «60%» still being repeated describes a regime that, for a new tenancy, no longer generally exists.

Second, and this is the one that matters here: it is a relief under Spanish resident income tax, not under IRNR. Article 24.6 of the IRNR act lets EU and EEA residents deduct the expenses allowed under income tax rules, but the article 23.2 relief is not an expense: it is a reduction applied to an already-calculated net figure, and article 24.1 expressly excludes reductions when setting the taxable base. The Directorate-General for Taxation has confirmed this in binding rulings — V2283-12, for a German resident, says so in those words — and Spain’s Central Economic-Administrative Tribunal has settled doctrine to the same effect. A non-resident does not get that relief, EU citizen or not.

And a third detail almost nobody mentions: Andalusia has not declared any stressed rental zones, so the enhanced bands that depend on such a declaration have nowhere to apply on the Costa del Sol, not even for a resident owner. If someone pitches you a deal in Málaga province leaning on the 90% band, that deal has a problem before it starts.

One open front worth watching

There is live litigation that could change the non-EU calculation. In a judgment of 28 July 2025, Spain’s National High Court found for a United States resident, holding it contrary to the free movement of capital that expense deduction is reserved to EU and EEA residents. The Supreme Court admitted the State Attorney’s appeal in July 2026 and judgment is pending.

Be careful what that does and does not mean. The case is about expense deduction for residents of third countries, not about the residential letting relief. If the Supreme Court upholds the ruling, a British or American owner could become able to deduct costs, and the 24%-on-gross scenario in our table would stop being the only one. Until judgment, the rule in force is the one we have applied.

What you can deduct as an EU resident

If you live in the EU, Iceland, Norway or Liechtenstein, the deductible list is the Spanish income tax one: IBI, community fees, insurance, utilities you pay, interest on the purchase loan, repairs and upkeep, management fees and, above all, depreciation — 3% a year on the higher of the building’s acquisition cost or its rateable value, excluding land.

Depreciation is the most powerful deduction and the most frequently forgotten, because it never leaves your bank account: it is a book entry. On a €286,000 flat with 60% attributable to the building, that is about €5,100 a year reducing the taxable base with nothing paid out. For many EU owners on this coast, it is the difference between paying tax and not paying it.

Two warnings: deductions apply only for the days the property was actually let — empty days generate no deductible cost and are separately taxed as imputed income — and every deduction needs an invoice and a traceable payment.

The euro-by-euro case: a two-bedroom flat in Fuengirola

Percentages so far. Now a specific flat. This is a constructed example built on real local prices and property types, not the accounts of an existing deal, which is why each figure is exact rather than a range.

A two-bedroom, 78 m² apartment in Fuengirola, in an eighties building ten minutes’ walk from the beach, with a lift and no pool. Price €286,000 — the average Fuengirola apartment in our index. Cash purchase, so leverage does not muddy the yield.

Step 1: what you actually tie up

Item	Amount	Note
Purchase price	€286,000	Average Fuengirola apartment in the SolProp index
ITP transfer tax at 7%	€20,020	General Andalusian rate on resale housing
Notary	€900	Scaled by price and number of pages
Land registry	€600	Registering the deed
Gestoría	€400	Filing the tax and registration paperwork
Lawyer	€2,860	About 1%, standard for non-resident purchases
Preparation and furniture	€6,000	Paint, appliances, basic furnishing to let
Total invested capital	€316,780	10.8% above the price on the deed

First correction, and we have not let anything yet. The index puts Fuengirola at an estimated 6.5% gross. With a real long-term tenancy, the market rent for this flat is around €1,250 a month: €15,000 a year, a 5.2% gross on price and 4.7% on invested capital.

That difference is not a modelling error. The index blends letting types and uses area-wide reference rents, including seasonal ones, which are higher per night. It is precisely why a published yield cannot go into a budget without first being brought down to a specific property.

Step 2: gross to net, line by line

Item	Annual amount	Detail
Contracted rent	+€15,000	€1,250/month for twelve months
IBI and refuse charge	−€620	78 m² flat, moderate rateable value
Community fees	−€1,140	€95/month, lift, no pool
Buildings and rent-guarantee insurance	−€320	Structure, contents and liability
Maintenance and repairs	−€1,400	Annual provision: air conditioning, plumbing, blinds, paint between tenants
Voids	−€600	Half a month a year, or one month every two years
Letting management	−€1,740	10% of rent collected plus VAT
Works reserve	−€400	Reserve fund and future building works
Net before tax	€8,780	€6,220 gone, 41.5% of the rent

On €316,780 of invested capital, that net before tax is 2.8%. From a published 6.5% to 2.8% with the tax authority yet to appear and nothing having gone wrong: no arrears, no special levy, no serious breakdown.

Step 3: tax, according to where you live

Item	EU / EEA resident	Resident outside the EEA
Gross income	€15,000	€15,000
Deductible costs	−€6,220	€0
Depreciation at 3%	−€5,148	€0
Taxable base	€3,632	€15,000
Rate	19%	24%
IRNR tax due	€690	€3,600
Net after tax	€8,090	€5,180
Net yield on invested capital	2.6%	1.6%

The whole journey, at a glance: 6.5% published → 5.2% gross on price → 4.7% gross on invested capital → 2.8% net before tax → 2.6% net as an EU resident → 1.6% as a non-EU resident.

A 2.6% net is not a bad number for a real euro asset, and whoever buys on this coast rarely buys income alone. But 1.6% demands questions: it is deposit-account territory without any of a deposit’s convenience on liquidity, maintenance or remote management. If you are outside the EEA, the tax structure of your purchase is not administrative detail — it is half your result.

What if I put it on Airbnb? The same flat, the other calculation

The natural reaction to a 2.8% net is to chase more income, and here that means holiday letting. On paper the improvement is enormous: the same apartment at €110 a night with 62% annual occupancy brings in €24,900 a year. That is an 8.7% gross against 5.2% for the long-term let.

And this is where the calculation takes its revenge, because holiday letting changes the entire cost structure. Utilities become yours. Cleaning stops being a between-tenants cost and becomes a between-stays cost. Furniture wears out in three years instead of ten. And between the platform and whoever operates the flat goes a slice of turnover that simply does not exist on a long-term let.

Item	Long-term let	Holiday let
Annual income	€15,000	€24,900
Gross yield on price	5.2%	8.7%
Platform commission	—	−€3,735
Management, cleaning and operations	−€1,740	−€6,026
Utilities (water, electricity, internet)	—	−€2,400
IBI and refuse charge	−€620	−€620
Community fees	−€1,140	−€1,140
Insurance	−€320	−€480
Maintenance and replacement	−€1,400	−€2,200
Voids	−€600	Already in the 62% occupancy
Levies, licence and fees	−€400	−€150
Net before tax	€8,780	€8,149
Net on invested capital	2.8%	2.6%
Net after IRNR, EU resident	€8,090 (2.6%)	€7,207 (2.3%)
Net after IRNR, outside the EEA	€5,180 (1.6%)	€2,173 (0.7%)

Stop at the net-before-tax row. An 8.7% gross and a 5.2% gross end up at almost the same money: €8,149 against €8,780. The holiday let brings in 66% more and earns slightly less, with far more work, more regulatory risk and total exposure to seasonality. It is the cleanest example there is of why gross yield cannot decide anything.

The last row is brutal. An owner from outside the European Economic Area pays 24% on the full €24,900, not on profit: €5,976 of tax against €8,149 of real profit. What remains is 0.7% on invested capital. For that profile, a remotely managed holiday let is not an income investment.

Two qualifications. First, these numbers assume delegated management; if you run the flat yourself and live nearby, you recover much of that €6,026 and holiday letting does pull ahead. Second, if you provide hotel-type services — cleaning during the stay, linen changes, a reception — the activity stops being property income and is treated as a business, with VAT and other obligations. The full comparison is in holiday lets versus long-term rentals on the Costa del Sol, and the permits in the Costa del Sol tourist licence guide. For the stable option, Spanish tenancy law is covered in long-term rentals on the Costa del Sol.

One more thing that costs money to forget: days the property is not let are still taxed, as imputed property income. It is calculated on the rateable value — 1.1% where the value has been revised, 2% where it has not — and taxed at the same 19% or 24%. A holiday flat at 62% occupancy spends 38% of the year generating a taxable base and no income at all.

The opportunity cost of buying cheap in a slow-moving market

Now cross the two columns nobody looks at together: yield and absorption.

Manilva leads on yield at 7.5% and is among the slowest to turn over: 79% absorption and about fifteen months of stock. It is a small market, heavily dependent on foreign second-home demand and thin on local buyers. Málaga city looks like the opposite case and has the same underlying problem: 6.5% yield and the lowest absorption of the twelve at 74%, because supply has grown faster than transactions.

Why does this matter if your plan is to collect rent? Because every property investment has an exit date, even if you have not written one down: inheritance, a change of country, a need for liquidity, a regulatory change. On the day you sell, the difference between twelve and fifteen months of stock is the discount you will accept to be the one who sells rather than your neighbour.

Put numbers on that wait. A €307,000 flat yielding 2.8% net generates about €8,600 a year. If you take six months longer than expected to sell and drop the price 5% to unblock the deal, that adjustment is €15,350 — more than eighteen months of net rent, in a single negotiation. The extra point and a half of yield the cheap area gave you takes eight to ten years to make up a 5% exit discount.

So the right question is not «where does it yield most» but «where does every euro yield most given what it will cost me to get it back«. Our analysis of where property sells fastest on the Costa del Sol works through absorption town by town.

The exception that has both

One area breaks the trade-off: Torremolinos, at 7.2% estimated yield and 104% absorption, the only one of the twelve above 100% — more homes sell than come to market. And it does it at an average price of €315,000, in the coast’s lower band.

The explanation is not mysterious: rental demand runs all year rather than only in summer, mixing working residents, European retirees and city tourism; the airport is twelve minutes away by train; and the stock is mostly small apartments, the type with the widest pool of potential buyers. Benalmádena (6.8% and 97%) and Fuengirola (6.5% and 95%) belong to the same family.

This is not a buy recommendation or a forecast: it is what these figures say, with the limitations already declared. But if you took one idea from the table, it is that the Torremolinos–Benalmádena–Fuengirola axis is where estimated yield and turnover coincide, and that coincidence is worth more than half a point of income. The best areas to invest in Málaga in 2026 and the emerging areas that still offer reasonable prices add the neighbourhood-level reading.

When a high yield is not worth it

The honest conclusion is not «buy where the yield is highest». It is that there are at least four situations where a high yield is a bad signal dressed as a good one.

When turnover is slow. A high yield in a market with fifteen or sixteen months of stock is usually the market paying you to accept illiquidity. That is a risk premium, not a bargain, and if your horizon is short or uncertain you will hand it all back in the exit discount.

When demand is seasonal. A flat that only lets well from June to September shows an excellent annualised yield calculated on peak-season rates. The reality is eight months of costs running against idle income. Always ask about occupancy from November to February: that is where you see whether the market is real or a postcard.

When you manage from abroad. A 7.5% with self-management and a 7.5% with delegated management are two different investments, separated by 1.5 to 2.5 points of net return. If you live 2,000 kilometres away, budget the management cost in from the start: the deal has to work with that cost, not despite it.

When the high yield comes from a low price rather than a high rent. A yield rises whether rent goes up or price goes down, and those are not the same thing. A property that is cheap because of dilapidation, a difficult owners’ association or a pending €12,000 levy shows a wonderful yield the day you buy and charges you for it over ten years. Before celebrating a yield, ask why it is cheap.

And in fairness to the expensive areas: 4.5% in Nueva Andalucía, with an international exit buyer and no dependence on Spanish mortgage lending, can be a better investment than 7.5% in a fifteen-month market. It depends on whether your plan is to collect or to hold. Neither answer is correct in the abstract.

Seven mistakes that ruin the numbers

1. Calculating yield on price rather than on invested capital. Ignoring transfer tax, notary, registry, lawyer and preparation inflates the result by about half a point before you start.
2. Budgeting twelve months of rent. Nobody collects twelve every year for ten years. Provision for voids from the first year.
3. Putting management at zero. «I’ll handle it myself» is true in year one and stops being true when you change job, country or mood. As a non-resident it is unrealistic from the start.
4. Forgetting the tax, or assuming the wrong rate. It is the one line you cannot negotiate. Check whether you pay 19% with deductions or 24% on gross before you make an offer, not after completion.
5. Counting on the residential letting relief without being entitled to it. It has not been 60% since 2024 for new tenancies, a non-resident cannot apply it under the prevailing position, and Andalusia has no declared stressed zones to rely on.
6. Not asking for the community minutes. An approved but unexecuted façade levy can cost €4,000–15,000, appears in no listing, and does appear in the minutes and the debt certificate.
7. Treating yield and capital growth as the same thing. They are two different returns with different risks and different payment dates. Add them if you like, but never accept a single figure that blends them.

How to calculate your real net yield, step by step

1. Fix your invested capital. Price plus 7% ITP, notary, registry, gestoría, lawyer and preparation. That is your denominator for everything that follows.
2. Find the real rent for that specific flat, not the area average. Look at three long-term listings in the same building or street and take the lowest.
3. Ask for the IBI bill, the last three sets of community minutes and the nota simple before offering. The nota simple is the land registry extract showing who legally owns the property and what charges, mortgages or embargoes sit on it — the single most important document a foreign buyer can read.
4. Provision maintenance by the building’s age. 5% of rent if built after 2005; 8%–10% if before 1990.
5. Add voids even if it feels pessimistic. Half a month a year in continuous-demand areas; a month or more in seasonal ones.
6. Put management in at market price — 8%–10% plus VAT on a long-term let — even if you plan to do it yourself. If the deal only works with your labour free, it does not work.
7. Apply your actual IRNR rate. 19% with costs and depreciation inside the EEA; 24% on gross income outside it. Check your country’s double taxation treaty with Spain so you are not taxed twice.
8. Divide the final net by the invested capital from step 1 and compare that number, and only that number, across the areas you are considering. Working out how much a Costa del Sol property is worth gives you the other end of the equation, the day you sell.

If you are financing the purchase, leverage moves this picture both ways: it multiplies return on your own funds when borrowing costs less than the net yield and wrecks it when it does not. Conditions are covered in the guide to getting the right mortgage and you can check them through our mortgage service. If you have not bought in Spain before, buying property in Spain as a foreigner covers the NIE, the bank account and the sequence of the purchase, and it can all be done without travelling through a power of attorney.

Frequently asked questions

Which Costa del Sol area has the highest rental yield?

Manilva, at an estimated 7.5% gross, followed by Torremolinos (7.2%), Benalmádena (6.8%), and Málaga city and Fuengirola (6.5%). These are estimates from SolProp’s own index, not guaranteed returns. Manilva combines that yield with the slowest turnover in the group, so the highest number is not automatically the best investment.

What is the difference between gross and net rental yield?

Gross divides annual rent by the purchase price and deducts nothing. Net subtracts IBI, community fees, insurance, maintenance, voids, management and building levies, then divides by the capital you actually invested, including purchase taxes and costs. On the Costa del Sol, net before tax tends to land near 60% of gross.

How much tax do non-residents pay on rental income in Spain?

If you live in the EU, Iceland, Norway or Liechtenstein, 19% on net income after deducting costs and 3% depreciation. If you live outside the European Economic Area, 24% on gross income with no deductions whatsoever. It is declared on form 210 for non-resident income tax, and you need a NIE number to file it.

Can I claim the 60% relief for letting residential property?

No. Law 12/2023 cut that relief to a general 50% for tenancies signed from 26 May 2023, with higher bands only in defined cases. And it is a relief under Spanish resident income tax: a non-resident taxed under IRNR cannot apply it, EU citizen or not, per binding rulings of the Directorate-General for Taxation and settled tribunal doctrine.

Does a holiday let earn more than a long-term rental?

In gross terms yes, by a wide margin; in net terms, almost never as much as it looks. In our Fuengirola case the holiday let brings in 66% more (€24,900 against €15,000) and ends with slightly lower pre-tax profit, because it absorbs utilities, cleaning, platform commission and much faster furniture replacement. With hands-on local management the balance does tip towards holiday letting.

Why do Marbella and Nueva Andalucía yield less if they are the most expensive?

Because rents follow use demand and local wages, while purchase prices also follow international capital and expected appreciation. A Marbella apartment costs 75% more than one in Torremolinos, but its long-term tenant does not earn 75% more. That gap between price and rent is exactly the missing yield.

What expenses can a foreign owner deduct from rental income?

Only if you live in the EU or EEA. In that case: IBI, community fees, insurance, utilities you pay, interest on the purchase loan, repairs and upkeep, management fees, and 3% annual depreciation on the building value. Deductions apply in proportion to the days actually let. Residents outside the EEA deduct nothing at all.

How much does a letting agent charge on the Costa del Sol?

Between 8% and 10% of rent collected plus VAT on a long-term let, usually with one extra month’s rent for finding and signing the first tenant. On holiday lets, 18% to 25% of turnover plus VAT, because it covers cleaning, linen, guest handling and running the booking platforms.

Is it better to buy cheap in a high-yield area?

Only if that market actually turns over. A high yield in a town with fifteen months of stock is usually an illiquidity premium rather than an opportunity. If you take six extra months to sell and accept a 5% discount to close, that adjustment consumes eight to ten years of the yield advantage the cheap area gave you.

What is absorption and why does it matter to an investor?

It is annual transactions divided by homes on the market. Above 100%, more sells than arrives and stock clears; below 80%, it accumulates. It estimates how long a sale will take. In our index it runs from 104% in Torremolinos to 74% in Málaga city, and it is an estimated turnover indicator.

Keep reading

• Holiday lets versus long-term rentals: the real returns
• Where property sells fastest on the Costa del Sol: absorption and months of stock
• Taxes on buying property in Andalusia: ITP, VAT and hidden costs
• What €300,000 buys in each Costa del Sol town
• Selling a property on the Costa del Sol as a non-resident
• It’s not Marbella: where prices rose most in 2026

Sources and methodology

The prices, yields and absorption for the twelve areas come from the SolProp Costa del Sol Price Index (v2026.3, data to June 2026). It is our own estimate, built from asking prices and our own portfolio, and not a record of registered transactions: it does not come from the Land Registrars’ Association, the Cadastre or the National Statistics Institute, and it should not be set head-to-head against their statistics, which measure different variables from different sources. The yield is a modelled indicator, not the return of any specific property, and absorption is calculated as annual transactions divided by homes on the market: an estimated turnover indicator. Full method at the SolProp price index methodology.

The tax framework comes from the consolidated text of the Non-Resident Income Tax Act (Royal Legislative Decree 5/2004), articles 24 and 25, for rates and deductibility; from Law 35/2006 on personal income tax for deductible expenses and depreciation; and from Law 12/2023 on the right to housing, which amended the letting relief in article 23.2 of the income tax act. The general 7% transfer tax rate reflects current Andalusian regional legislation. That the article 23.2 relief does not reach IRNR taxpayers rests on article 24.1 of the consolidated text, on binding rulings V2283-12 and V5255-26 of the Directorate-General for Taxation, and on settled doctrine of the Central Economic-Administrative Tribunal. The separate litigation on expense deduction by residents of third countries is awaiting Supreme Court judgment following the July 2026 admission order.

Operating cost ranges — community fees, insurance, maintenance, voids and management — come from real transactions and quotes handled on this coast during the first half of 2026, without identifying properties or owners. IBI amounts are orders of magnitude: each town council sets its own rate within the limits of the Local Finance Act, so your own bill is the only valid figure for your calculation.

The Fuengirola apartment and the holiday-let scenario are constructed examples built on real local prices, rents and property types, not the accounts of an existing investment. The €1,250 monthly rent, the €110 nightly rate and the 62% occupancy are reasonable assumptions for that type of property, not observed data: change any of them and the result changes, which is exactly why we publish the whole breakdown instead of a single figure.

No returns are promised. The yields in this article are estimates and are presented as such: no figure should be read as a forecast of future profitability or a guarantee of capital growth. The price movements quoted describe what happened between the stated dates according to our own index and do not anticipate what will happen next.

This article is general information and does not replace advice from a tax adviser or lawyer for your specific case. Last updated: August 2026.