Long-term vs holiday letting: which suits you best

You have a flat on the Costa Blanca and want to make it work. The question is not whether to rent — it is how. Long-term and holiday letting are two models with very different returns, management demands and risks. This article puts them face to face with real numbers and no romance.

The two models, defined

Long-term letting (also called residential or habitual): minimum one-year contract under the LAU (Urban Tenancies Act), extendable up to five years for individuals or seven if the landlord is a company. The tenant lives there as their primary residence.

Holiday (tourist) letting: short stays of up to 10 days for the same guest, regulated by the regional tourist-use housing (VUT) rules. Requires a tourist licence in the Valencian Community.

There is a third way gaining ground: seasonal letting (1-11 months), which is neither primary residence nor tourist. It falls under the LAU but with less tenant protection. We include it in the comparison because it is an increasingly popular alternative.

Profitability: the numbers face to face

Take a concrete example: a 2-bedroom flat in Benalúa (Alicante), purchased for €140 000.

Long-term

• Monthly rent: €700
• Annual gross rent: €8 400
• Estimated occupancy: 95 % (11.4 months)
• Effective income: ~€7 980
• Gross yield: 5.7 %

Holiday

• Average rate: €85/night
• Average annual occupancy: 65 % (237 nights)
• Gross income: ~€20 145
• Operating costs (cleaning, utilities, platforms, management): ~€8 000-10 000
• Net operating income: ~€10 145-12 145
• Gross yield: 14.4 % | Net operating: 7.2-8.7 %

Seasonal (medium-term)

• Monthly rent: €900-1 100
• Average contract length: 3-4 months
• Occupancy: 80 % (9.6 months)
• Gross income: ~€9 600
• Gross yield: 6.9 %

The numbers are clear: holiday lets yield more gross, but the gap narrows when you subtract operating costs. And long-term wins on predictability and management effort.

Management: time is money

Long-term

One tenant per year (or more if they renew). You sign the contract, collect rent by direct debit and handle occasional issues. Management effort is minimal: about 2-5 hours per month. If you use an agency, it charges 5 % to 8 % of the rent.

Holiday

Multiple guests per month. Check-in, check-out, cleaning, communication, review management, price optimisation, frequent maintenance. The effort is 15-30 hours per month for a single property, or 15-25 % of turnover if you outsource to a management company.

Seasonal

The middle ground. Less turnover than holiday (3-4 tenants per year), more flexibility than long-term. Moderate management effort: 5-10 hours per month.

Risk and legal protection

Long-term

The LAU strongly protects the tenant. Eviction for non-payment can take 6 to 12 months (sometimes more) and requires court proceedings. The main risk is a defaulting tenant: stops paying and recovery is slow and costly. Mitigation: non-payment insurance (cost: 3-5 % of annual rent) and rigorous tenant screening.

Holiday

Non-payment risk is virtually zero (guests pay upfront through the platform). But there are other risks: property damage (parties, carelessness), regulatory changes (moratoriums, new restrictions), seasonality (income concentrated in summer) and platform dependence (changes in Airbnb/Booking algorithms or commissions).

Seasonal

Intermediate risk. Seasonal tenants have less protection than long-term ones, making property recovery easier. And if the tenant defaults, the process is faster than under residential LAU rules.

Tax treatment for the owner

Spanish tax residents

Long-term letting as the tenant's primary residence allows a 50-60 % reduction in the taxation of net income in personal income tax (the exact amount depends on the latest legislative changes). Holiday letting does not have this reduction — it is taxed on 100 % of net income. This can balance the profitability difference between both models.

Non-residents

EU non-residents pay 19 % on net income (revenue minus deductible expenses). Non-EU pay 24 % on gross revenue with no expense deductions. The rental type does not change the tax rate, but it does affect the base: holiday letting has more deductible expenses (cleaning, utilities, management).

Property wear and tear

A factor rarely featured in calculations but one that impacts long-term return:

• Long-term: normal wear. The tenant treats the flat as their home. Equipment replacement is minimal (every 5-10 years).
• Holiday: accelerated wear. Multiple users mean faster turnover of appliances, furniture, paintwork and textiles. Replacement budget: 2-4 % of property value per year.
• Seasonal: moderate wear, closer to long-term than holiday.

When to choose each option

Choose long-term if:

• You want predictable income with minimal management.
• You do not live near the property and do not want to hire professional management.
• The property is in an area with stable residential demand (Alicante city, San Vicente, Mutxamel).
• You prioritise tax peace of mind (IRPF reduction) and legal stability (stable contract).
• Your investment horizon is long (10+ years).

Choose holiday if:

• The property is in a tourist zone where a VUT licence can be obtained (no moratorium).
• You can manage actively or pay someone to (15-25 % of turnover).
• You want to maximise gross yield and accept seasonality.
• You are willing to take on regulatory risk (policy changes, moratoriums).
• You want to use the property personally during low-demand periods.

Choose seasonal if:

• You want a balance between income and management.
• Your property attracts digital nomads, relocated workers or Erasmus students.
• You do not want the obligations of a VUT licence but want higher rent than long-term.
• You value the flexibility of recovering the property without residential LAU timelines.

Frequently asked questions

Can I alternate between long-term and holiday?

In theory yes, but in practice it is complicated. Switching from long-term to holiday requires not renewing the contract (waiting for it to end), obtaining the VUT licence and re-equipping the property for guests. The reverse is simpler but you lose the VUT licence if you do not keep it active. Seasonal is more flexible: you can alternate seasonal periods with holiday if you have a licence.

What yield do I need for holiday to be worthwhile?

As a rule of thumb, holiday letting needs to generate at least 40-50 % more gross income than long-term to offset higher operating costs, property wear, regulatory risk and management. If the difference is smaller, long-term is usually the more efficient option net.

Can I do seasonal letting without a tourist licence?

Yes, as long as contracts exceed 10 days and the property is not advertised as tourist accommodation. Seasonal letting (1-11 months) falls under the LAU as a non-primary-residence contract, requiring no VUT licence or tourist registration. But beware: if the actual duration is under 10 days or it is advertised on tourist platforms, the authorities may deem it covert tourist activity.

How does location affect the decision?

Location is the most decisive factor. In areas with strong tourist demand and available licences (Benidorm, Calpe, Jávea), holiday usually wins. In residential areas with stable demand (San Vicente, Mutxamel, inland Alicante city), long-term is more efficient. In mixed areas (Playa de San Juan, El Campello, Santa Pola), seasonal can be the best compromise.

What insurance do I need in each case?

For long-term, a standard home insurance policy plus rental non-payment insurance (3-5 % of annual rent). For holiday, the mandatory civil liability insurance for the VUT plus home insurance covering guest damage. For seasonal, standard home insurance is usually sufficient, but check it covers short-duration stays.

If you are thinking of putting your property to work on the Costa Blanca, explore our available properties or contact us for a personalised consultation.