Holiday Lets vs Long-Term Rentals on the Costa del Sol: Real Returns 2026
It’s the decision that moves the most money — and causes the most mistakes — among Costa del Sol investors. Holiday lets promise gross yields of 8% or 9%; long-term rentals barely reach 5%. On paper there’s no debate. On the real profit and loss account there is: once you deduct operating costs, vacancy, management and tax, the gap narrows dramatically and, for some profiles, reverses completely.
This article runs the full calculation using a real case: a €250,000 apartment in Fuengirola, operated under both models, with the final net result calculated for three different tax profiles — resident in Spain, EU non-resident and non-EU non-resident. The outcome is surprising. We also cover the regulatory framework in force in 2026 following the Supreme Court ruling in May, the third route almost nobody considers — seasonal lets — and a matrix to help you decide which model fits your situation.
Quick summary: what pays more on the Costa del Sol
- On gross income the holiday let wins clearly: in our base case, 8.81% against 5.10% for the long-term rental, measured on total investment.
- Net before tax, the gap shrinks to under one point: 4.57% against 3.73%, because holiday lets absorb management, utilities, replacement costs and vacancy.
- After tax, it depends where you’re resident. For a Spanish tax resident the difference all but disappears (3.20% against 3.17%), thanks to the 50% income tax reduction on long-term residential lettings.
- For an EU non-resident, holiday letting wins: 3.70% against 3.02%, because they’re taxed at 19% on net income and can deduct expenses.
- For a non-EU non-resident (UK, US, Switzerland), long-term letting edges ahead: 2.50% against 2.46%. The 24% flat rate on gross income with no deductions punishes the high-turnover model far harder.
- The VFT code from Andalusia’s Tourism Registry is the valid identifier. The national single registry was annulled by the Supreme Court in May 2026, returning control to regional level.
- Since April 2025 you need a favourable vote from three fifths of your building’s owners to register a new tourist dwelling. This is now the main bottleneck in coastal apartment blocks.
- Andalusia has declared no stressed rental market zones: there’s no price cap on new long-term contracts, unlike Catalonia or the Basque Country.
Which is more profitable on the Costa del Sol, holiday lets or long-term rentals?
The short answer: on gross income the holiday let wins almost every time; on net yield after tax the advantage narrows to fractions of a point and depends mainly on your tax residency and how much time you’re willing to invest. Anyone comparing the two models by looking only at the gross percentage is comparing things that aren’t equivalent: a long-term rental is passive income with minimal costs, while a holiday let is a small hospitality business with a cost structure, seasonality and regulatory risk.
The market context explains why this question matters so much here. Málaga is the province with the largest volume of holiday accommodation in Spain: 45,176 tourist dwellings according to the INE’s measurement with May 2026 data, ahead of Alicante, the Balearics and Madrid. Málaga city ranks second nationally with 8,288 dwellings, followed by Marbella in fourth place with 6,987 and Mijas in seventh with 4,465. In other words: you’re competing in the most saturated holiday rental market in the country, with purchase prices across the province around €4,183/m² according to Idealista data from June 2026. Supply is vast and the entry price is high. That compresses margins in both models.
There aren’t two options, there are three: long-term, seasonal and tourist
Before looking at numbers, it’s worth being clear on the legal classification, because it determines the licence, the tax treatment and the tenant’s protections. Most articles present a binary that leaves out the middle option — which works particularly well on the Costa del Sol given the winter resident and digital nomad profile.
| Type | Legal framework | Typical duration | Tourist licence? | Tenant profile |
|---|---|---|---|---|
| Long-term (main residence) | Urban Leases Act (LAU), residential tenancy | Annual contract with extensions up to 5 years (7 if the landlord is a company) | No | Settled resident, family, local worker |
| Seasonal (non-residential use) | LAU, tenancy for use other than main residence | 1 to 11 months, no compulsory extension | No, provided it isn’t marketed as tourist accommodation | Nordic or British winter resident, digital nomad, relocated worker, student |
| Tourist (VFT) | Decree 28/2016 and Decree 31/2024, with registration in Andalusia’s Tourism Registry | Stays of days or weeks | Yes, RTA-issued VFT code, mandatory and visible in every listing | Holiday tourist |
Seasonal letting is the coast’s great underused option. It allows monthly rents well above long-term levels — a furnished two-bedroom on the seafront can ask between €1,400 and €1,900 a month over the winter season — without needing a VFT licence, without the operational burden of weekly turnover, and without the LAU’s compulsory five-year extensions. In exchange, it demands carefully drafted contracts that evidence the temporary purpose, because a sham seasonal contract that in reality conceals a main residence can be reclassified by a court as a residential tenancy with all the associated protections.
The real case: a €250,000 apartment in Fuengirola, both models
We’ve taken a scenario representative of the product most commonly bought on the coast: a two-bedroom apartment, less than 500 metres from the beach, in good condition and ready to let.
- Purchase price: €250,000
- Purchase costs (13%): €32,500 covering transfer tax, notary, land registry and conveyancing
- Total investment: €282,500, unleveraged
- Long-term scenario: rent of €1,200 per month
- Holiday let scenario: 62% annual occupancy (226 nights) at a weighted average rate of €110 per night
All yields are calculated on the total investment of €282,500, not on the purchase price. It’s the only honest way to compare: acquisition costs are money actually spent and form part of the capital invested. You’ll find the full breakdown in our guide to taxes when buying a property in Andalusia.
Side-by-side profit and loss
| Item | Long-term rental | Holiday let (VFT) |
|---|---|---|
| Annual gross income | €14,400 | €24,900 |
| Gross yield | 5.10% | 8.81% |
| Management (5% long-term / 20% holiday) | −€720 | −€4,980 |
| Utilities (electricity, water, internet, TV) | €0 (paid by tenant) | −€2,400 |
| Community of owners fees | −€1,200 | −€1,200 |
| Council tax (IBI) and municipal charges | −€500 | −€500 |
| Insurance | −€450 (buildings + rent guarantee) | −€500 (VFT-specific) |
| Maintenance and furniture replacement | −€600 | −€1,500 |
| Laundry and consumables | €0 | −€600 |
| Regulatory compliance and admin | €0 | −€300 |
| Vacancy provision | −€400 | Already built into the 62% occupancy |
| Total operating costs | −€3,870 | −€11,980 |
| Net result before tax | €10,530 | €12,920 |
| Net yield before tax | 3.73% | 4.57% |
The first revealing figure: operating costs swallow 48% of gross income in the holiday model against 27% in long-term letting. The 3.71-point gross gap narrows to 0.84 points before tax. Translated into euros, the holiday let leaves €2,390 more per year — in exchange for handling guest changeovers, incidents, reviews and a permanent compliance structure.
The decisive factor: where you’re tax resident
This is where the comparison splits into three different paths. What determines your tax treatment isn’t your nationality but your tax residency, and the rules change substantially between the three profiles.
| Tax profile | Tax and rate | Can deduct expenses? | Main-residence reduction? |
|---|---|---|---|
| Spanish tax resident | Personal income tax (IRPF), progressive scale | Yes, including 3% depreciation on the construction value | Yes: general 50% reduction on net income from main-residence lettings |
| Non-resident from the EU, Iceland, Norway or Liechtenstein | Non-resident income tax (IRNR), flat 19% | Yes, expenses necessary to generate the income | No |
| Non-resident from the rest of the world (UK, US, Switzerland…) | Non-resident income tax (IRNR), flat 24% | No: taxed on gross income | No |
Applying these rules to our base case, and assuming a 30% combined marginal rate for the resident, the final outcome is this:
| Profile | Long-term: net after tax | Holiday let: net after tax | Which model wins? |
|---|---|---|---|
| Spanish tax resident | €8,950 — 3.17% | €9,044 — 3.20% | Effectively a tie |
| EU/EEA non-resident | €8,529 — 3.02% | €10,465 — 3.70% | Holiday let, by 0.68 points |
| Non-EU non-resident | €7,074 — 2.50% | €6,944 — 2.46% | Long-term, by a narrow margin |
Three conclusions you’ll rarely read in the sector. First: for a Spanish resident, the 50% income tax reduction on main-residence lettings almost entirely cancels out the holiday let’s operational advantage, so the extra management effort doesn’t translate into money. Second: the EU non-resident is the profile for whom holiday letting makes the most sense, because they’re taxed at a low flat rate on net income. Third, and the most counterintuitive: for a British, American or Swiss owner, the holiday model loses its appeal because the 24% applies to gross income without deducting a single euro of costs. In that scenario, the €5,976 tax bill equates to an effective rate of 46% on the real operating profit of €12,920.
Methodology and caveats
These figures are an illustrative model, not a forecast. Gross income is based on occupancy and rate assumptions that are reasonable for a well-located, mid-to-high quality property, but they vary enormously by municipality, distance to the beach, quality of the property and the commercial ability of the manager. The expense percentages are market averages. The model excludes mortgage financing, which leverages the return on equity but adds risk and finance costs; the deductible 3% depreciation on construction value, which would further reduce the taxable base for residents and EU non-residents; and capital appreciation, which has been significant on the Costa del Sol in recent years but is not guaranteed going forward. Past returns do not guarantee future results. Always verify your specific case with a qualified tax adviser and against the official sources of the AEAT and the Andalusian Tax Agency before making investment decisions.
The 2026 regulatory framework: what changed and what still stands
2026 has been a year of regulatory upheaval, and it’s worth separating the noise from what genuinely affects your investment.
The national registry was annulled; the VFT code is the valid one
The Spanish Supreme Court, in its ruling 620/2026, declared void the single registration procedure for short-term rentals set out in Royal Decree 1312/2024, on the grounds that the State lacked the competence to create it. The Court concluded that none of the constitutional powers invoked covered that procedure, since it was a registry tied to housing and tourism competences that overlapped with the existing regional registries. For owners, the practical effect is direct: registry control returns to regional level, while the digital single window and the platforms’ information obligations remain in place. The valid identifier in Andalusia is the VFT code issued by Andalusia’s Tourism Registry, formatted VFT/MA/XXXXX for Málaga province, and it must appear visibly in every listing.
Your community of owners can stop you letting
This is now the biggest silent risk in a purchase aimed at holiday letting. Since 3 April 2025 it has been mandatory to obtain the consent of the community of owners to register a tourist dwelling in Andalusia, requiring a favourable vote from 60% of owners, with the agreement recorded in writing and submitted during the registration process. In many buildings in Fuengirola, Benalmádena or Torremolinos that agreement simply isn’t forthcoming. Before buying on the assumption that you’ll operate as a VFT, ask for the community minutes: if there’s no authorisation, your business model isn’t viable and you’ll need to redirect it to long-term or seasonal letting.
Town halls can cap supply
Decree 31/2024 and Decree-Law 1/2025 on urgent housing measures give town halls the power to limit the number of tourist dwellings in specific areas or periods. It’s a power already being exercised in several Andalusian municipalities and one that may change during the life of your investment. Any financial projection based on holiday letting should build in this regulatory risk rather than ignore it.
On long-term lets, Andalusia plays by freer rules
This is the point in favour of the residential model. The Junta de Andalucía has not declared any stressed residential market zone, unlike Catalonia, the Basque Country, Navarre or the Balearics. In practice, that means that in Málaga and across the Costa del Sol the landlord sets the opening rent freely on new contracts, with no price containment index, and the large-landlord threshold stays at ten properties. What does apply nationwide is the cap on annual updates of existing contracts, benchmarked since 2025 to the INE index rather than to inflation. Andalusia also has its own Housing Law 5/2025, published in the regional gazette in December 2025 and in force since January 2026. The national framework has been volatile this year, so check the current position before signing long-term contracts.
Decision matrix: which model fits your profile
| Your situation | Recommended model | Why |
|---|---|---|
| Spanish tax resident seeking passive income | Long-term | The 50% income tax reduction levels the net result without the holiday let’s operational burden |
| EU non-resident with a professional manager | Holiday let (VFT) | Taxed at 19% on net income with deductible expenses; the profile that gets the most out of the model |
| British, American or Swiss non-resident | Long-term or seasonal | The 24% on gross income with no deductions disproportionately penalises the high-turnover model |
| Owner who wants to use the property several weeks a year | Seasonal or holiday let | A long-term tenancy blocks the property; seasonal letting lets you reserve your own months |
| Buyer in a building without community authorisation | Long-term or seasonal | Without the three-fifths agreement you can’t register the VFT: holiday letting isn’t a legal option |
| Investor prioritising predictability and low upkeep | Long-term | One contract, contained costs and no seasonality |
| Owner of a large, high-end property in a prime area | Seasonal | Attracts affluent winter residents and digital nomads with no tourist licence or compulsory extensions |
Risks you should budget for in each model
Holiday let risks
- Concentrated regulatory risk. A municipal restriction, a regional change or a refusal from the community can leave your asset without a business model overnight.
- Precautionary suspension of registration. The authorities can suspend your entry in the Tourism Registry over serious breaches without waiting for the penalty file to conclude, taking the property out of service for the duration of the process.
- Automatic listing removal. Platforms verify the validity of the registration number; an invalid or suspended code can lead to the listing being taken down without prior notice.
- Seasonality and saturation. With more than 45,000 tourist dwellings in the province, pressure on rates and off-season occupancy is real.
- Dependence on your manager. A well-spent 20% commission pays for itself; a mediocre manager destroys returns through poor reviews and vacancy.
Long-term rental risks
- Non-payment and slow eviction. The model’s main risk. Rent guarantee insurance and rigorous tenant screening are the best cover.
- The property is tied up for up to five years through the LAU’s compulsory extensions, limiting your flexibility to sell with vacant possession.
- Capped rent increases under the reference index, which may fall short of the real inflation in community fees and utilities.
- National regulatory risk. The tenancy framework has been especially unstable through 2026 and may be amended again.
Risks common to both
If you’re a non-resident, remember that for the periods when the property isn’t let you must declare imputed income via Modelo 210, calculated on 1.1% or 2% of the cadastral value depending on when it was last revised. And if you later sell as a non-resident, the buyer will withhold 3% of the price on account of your non-resident income tax. These are obligations many foreign owners discover late — and with surcharges attached.
How to decide which model suits you, step by step
Step 1: check whether holiday letting is even possible
Before running any numbers, verify two things: that the building’s statutes and community resolutions permit tourist use with the backing of three fifths of owners, and that the town hall hasn’t restricted the activity in that area. If either fails, the decision is already made.
Step 2: pin down your tax profile precisely
Establish whether you’re a Spanish tax resident, an EU non-resident or a non-EU non-resident. As the model shows, this single fact can reverse the conclusion about which option is more profitable.
Step 3: estimate income from real data, not promises
For holiday letting, ask for occupancy and average rate histories from comparable properties in the same building or development, not municipal averages. For long-term letting, cross-check asking rents in live listings against rents in contracts actually signed, which tend to be somewhat lower.
Step 4: build the full cost schedule
Include management, utilities, community fees, council tax, insurance, maintenance, furniture replacement, regulatory compliance and a vacancy provision. If your holiday let spreadsheet doesn’t reach 40–50% of costs against income, you’re probably missing a line item.
Step 5: apply the tax layer and compare net figures
Calculate the tax for your profile: income tax with the 50% reduction if you’re resident and letting as a main residence, 19% on net income if you’re an EU non-resident, 24% on gross if you’re outside the EU. Always compare after-tax results against total investment.
Step 6: price your own time and decide
If the net difference between models is under one percentage point, the question stops being financial and becomes personal: how much involvement do you want to take on, and how much flexibility of use do you need? With those figures on the table, the decision is usually obvious.
Frequently asked questions about rental returns on the Costa del Sol
What return does a Costa del Sol apartment generate?
In our model, a €250,000 apartment in Fuengirola delivers between 5.10% and 8.81% gross depending on the model, which becomes 3.73% to 4.57% net before tax and 2.46% to 3.70% after tax depending on the owner’s tax profile. For reference, the average gross residential yield in Spain stood at 6.5% in the second quarter of 2026 according to Idealista, down from 7.2% a year earlier. These are indicative figures: every property and every management approach produces different results.
Is holiday letting more profitable than long-term renting?
On gross income, yes, almost always. On net yield after tax, it depends on your tax residency: for an EU non-resident holiday letting wins clearly; for a Spanish resident the result is practically identical; and for a non-EU non-resident long-term letting can even return slightly more, because the 24% non-resident rate applies to gross income with no deductions.
Is the national single rental registry still mandatory?
No. The Supreme Court, through ruling 620/2026 in May 2026, annulled the single registration procedure for short-term rentals on the grounds that the State lacked competence. The valid identifier in Andalusia is the VFT code from Andalusia’s Tourism Registry. The digital single window and the platforms’ information obligations do remain in force.
Can my community of owners ban me from holiday letting?
Yes, and it’s currently the main practical obstacle. Since 3 April 2025, a favourable vote from three fifths of owners is required to register a new tourist dwelling in Andalusia, and that agreement must be evidenced in writing during the registration process. Without it you can’t legally operate as a VFT.
What tax does a foreigner pay on letting a property in Spain?
If you don’t live in Spain, you pay non-resident income tax via Modelo 210. Residents of the EU, Iceland, Norway and Liechtenstein apply 19% to net income and can deduct the necessary expenses; residents of the rest of the world, including the UK post-Brexit, apply 24% to gross income with no deductions.
How often is Modelo 210 filed for rental income?
For income accruing from 2024 onwards, rental income can be aggregated annually and filed in the first twenty calendar days of January of the following year, or from 1 to 15 January if payment is direct debited. Annual aggregation is an option: anyone who doesn’t choose it must continue declaring each accrual quarterly, in April, July, October and January.
Is there a rent cap in Málaga?
No. Andalusia has not declared any stressed residential market zone, so on new contracts the landlord sets the opening rent freely and no price containment index applies. There is a national cap on the annual updating of existing contracts, benchmarked to the INE index.
What is a seasonal let and when does it make sense?
It’s a tenancy for use other than a main residence, running from one to eleven months, with no compulsory extensions and no need for a tourist licence provided it isn’t marketed as tourist accommodation. On the Costa del Sol it works well with northern European winter residents and digital nomads, and it lets you reserve months for your own use. It requires a contract properly grounded in the temporary purpose.
What does a holiday rental management company charge?
Full-service management commissions typically sit between 18% and 25% of income, depending on the services included. Our model uses 20%. For long-term letting, management usually ranges from 5% to 8%, or one month’s rent on signing the contract.
Do I have to declare anything if my property is empty?
If you’re a non-resident, yes. For the periods when the property isn’t let you must declare imputed income via Modelo 210, calculated on 1.1% of the cadastral value if it was revised in the last ten years, or 2% otherwise, then applying your 19% or 24% rate.
About this article. Prepared by the SolProp team, a real estate agency on the Costa del Sol specialising in national and international buyers and investors, headquartered in Fuengirola (Málaga). Content reviewed in July 2026 in line with Decree 28/2016 and Decree 31/2024 on tourist dwellings, Decree-Law 1/2025, Andalusia’s Housing Law 5/2025, national Law 12/2023 on the right to housing, the Urban Leases Act, the consolidated Non-Resident Income Tax Act and Supreme Court ruling 620/2026. Market data from Idealista and the INE with the reference date indicated in each case. This article is for informational purposes only and does not constitute tax, legal or investment advice: the returns shown are illustrative models and do not guarantee results. Verify your specific case with a qualified adviser and against official sources before making decisions.
Want to know which model performs better with your specific property?
At SolProp we analyse investment deals every day across Fuengirola, Mijas, Marbella, Benalmádena, Torremolinos and Estepona. We help you estimate realistic income by area and model, verify whether tourist use is viable before you buy, and find the asset that fits your strategy.
