How You Can Earn 20% Per Year on European Short-Term Rental Investments And Get A Golden Visa At The Same Time

Depending on your point of view, short-term rental platforms like Airbnb are a curse or a godsend. If you are in the latter category and looking for a short-term rental to generate passive income, you may want to consider Spain. The beautiful country has diverse climates, a rich cultural history and a laid-back vibe that is reminiscent of the West Coast.

It also has a golden visa program that allows well-heeled investors to purchase a property — or combination of properties — worth over 500,000 euros ($543,625) and qualify for a five-year residency visa at the same time. If you continue to own the property and satisfy the annual residency requirements, you can renew your visa in perpetuity or apply for citizenship.

Best of all, you may be able to do it while earning 20% on your investment property. Keep reading to find out how.

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Apartments With Touristic Licenses

Like many cities in Europe, Barcelona was caught off-guard by the popularity of Airbnb. When the platform first entered the city, it was a free-for-all. Property owners were making money hand over fist and getting more money for a two-week stay than their long-term tenants were paying for two months. Even apartment renters were making money by renting out rooms in their units.

It wasn't long before that destabilized the city's rental market, which forced the local government to take action. Barcelona instituted a policy requiring all short-term landlords to apply for a "touristic license." There was a registration process and a taxation plan put in place that all participating landlords were required to abide by. Anyone caught renting out properties without a touristic license faces severe fines.

Even standard residential leases advised tenants they could be fined up to 10,000 euros for circumventing the licensing process by renting rooms illegally on Airbnb.  Barcelona's government went so far as to employ a team of investigators who ferret out unauthorized short-term rentals and see to it that the scofflaws are fined. Yet, all this was not enough to stem the tide of touristic license applications, so the city stopped issuing them. 

Here Is How You Can Earn 20%

In the U.S., the market value for commercial property is determined by its net operating income. That is not necessarily the case in Barcelona, where it's possible to buy a nice two-bedroom apartment with a preexisting touristic license for 500,000 euros or two units for 250,000 euros each. The cap placed on new licenses means that the remaining apartments with licenses can generate a lot of money for the property owners. 

Barcelona is one of Europe's most popular travel destinations, and by some estimates, it receives 800,000 tourists per month. Many of them prefer full apartments to hotels, and a 500,000-euro apartment can earn 10,000 to 15,000 euros per month during the six-month-long peak tourist season that runs from May to December. Barcelona's year-round friendly climate makes it possible to earn between, 4,000 and 7,000 euros per month in the off-season.

That's roughly $100,000 per year in rental revenue on a 500,000 euro investment, or 20% annually. Yes, there will be European taxes, management fees and other costs, but even if they add up to 40% of your $100,000 annual revenue, you could pocket $60,000 in passive income off of a 500,000-euro investment. That's an impressive return by any standard. On top of that, you will live and reside in a European paradise for as long as you like. 

Restrictions, Requirements And Other Considerations

Before you pack your bags and embark on your golden visa quest, you must consider the restrictions and requirements of the program. First, it isn't for everyone, and you can't qualify by financing a 500,000-euro property. You must put up the full 500,000 euros upfront on the property or on however many properties you buy. 

If you bought a million-euro property with 500,000 euros down, you would qualify for the program. But if you took out a mortgage on a 500,000-euro property, that purchase would not qualify you for the golden visa program. Second, you will need to live in Barcelona or somewhere in Spain. Third, there is not an abundance of properties with touristic licenses available so you'll need to keep your eyes open and act fast if you find one.

To renew the visa at the end of the five-year visa term, you can't spend more than 12 months outside of the country during that period. You will have also to pay taxes in Spain on your income. If you can handle these requirements, and you have 500,000 euros, which theoretically you could take out in equity on a property you already own in the U.S., the Spanish golden visa and touristic apartment may be the perfect escape plan for you. 

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