Investing in Tenerife property for long-term rental can be an excellent strategy for steady income, capital preservation, and lower operational demands compared to short-term holiday rentals. However, the long-term rental market in Tenerife South comes with its own legal requirements, tenant protections, and operational considerations — including the risk of okupas (squatters), which investors must handle carefully.

This guide (based on 2024 data) walks you through the step-by-step process of legally renting out your property long-term, understanding the latest regulations, and optimizing your investment for solid returns.

Why Choose Long-Term Rentals in Tenerife South?

The benefits of long-term rentals include:
• Stable monthly income
◦ You get consistent cash flow, without seasonal highs and lows.

• Lower operating costs
◦ Unlike holiday rentals, you typically don’t cover utilities, weekly cleanings, or constant guest turnover.

• Simpler management
◦ Once a reliable tenant is in place, management is often minimal, particularly if you hire an agency.

• No VV license required
◦ Long-term rentals (over 6 months, known as arrendamientos de vivienda) do not need a Vivienda Vacacional license or tourism registration.

Spanish long-term rentals are governed primarily by the Ley de Arrendamientos Urbanos (LAU), or Urban Lease Law. Key points include:
• Lease Duration
◦ Contracts signed as arrendamiento de vivienda (residential rental) have a mandatory minimum of 5 years (if the landlord is a private individual) or 7 years (if the landlord is a company).

• Rent Increases
◦ Annual rent increases are capped; as of 2024, Spain applies a 3% annual increase cap, even if inflation is higher.

• Deposit Rules
◦ Landlords can request one month’s rent as a legal deposit (fianza), which must be lodged with the regional housing authority.

• Energy Performance Certificate (EPC)
◦ You must provide an EPC when offering your property for rent.

• Okupa Risk
◦ Spain has strong tenant protections, making eviction a long, court-driven process — even if tenants stop paying rent.

• Local Taxes and Obligations
◦ Long-term rental income is subject to Spanish income tax, and non-resident owners must file declarations (e.g., Modelo 210).

① Prepare the Property

• Ensure the property meets habitable condition standards: working utilities, no structural hazards, functioning kitchen/bathroom.
• Properties can be furnished or unfurnished, depending on your target tenants.

② Obtain the Energy Performance Certificate (EPC)

• Hire a certified technician to issue the EPC, valid for 10 years, which must appear in your advertising.

③ Draft a Proper Rental Contract

• Use a contract that fully complies with the LAU, reflecting durations, deposits, and tenant rights.
• Hiring a lawyer or agency is recommended to ensure the contract is bulletproof.

④ Screen Tenants Thoroughly
• Perform credit checks, employment verification, and reference checks.
• Many landlords ask for proof of income or additional guarantees.

⑤ Register the Deposit
• The one-month legal deposit must be lodged with the Canary Islands housing authority (Instituto Canario de la Vivienda).

⑥ Handover and Documentation
• Perform a detailed inventory if furnished.

• Have both parties sign an entry condition report (acta de entrega) with photos.

⑦ Manage Ongoing Obligations
• Address repairs promptly, respect tenant privacy, and keep records for taxes.

• Rental Yields
◦ Tenerife South long-term rentals typically generate 3% to 5% gross annual yield.
◦ A two-bedroom apartment in Costa Adeje might rent for €1,200–€1,600/month; luxury villas can exceed €2,500–€4,000/month.

• Tenant Stability
◦ Long-term tenants often stay years, reducing turnover and vacancy.

• Lower Operating Costs
◦ Tenants usually cover utilities, while landlords handle structural maintenance.

• Legal Risks and Costs
◦ Evictions (due to non-payment or okupas) can take 6–12 months, so prevention is key.

• Market Demand
◦ Demand remains steady, boosted by digital nomads and foreign retirees.

• Use a Professional Agency
◦ Agencies handle contracts, screening, rent collection, and maintenance.

• Keep the Property Well-Maintained
◦ Regular maintenance ensures high tenant satisfaction and fewer problems.

• Stay Compliant with Taxes
◦ Non-resident landlords must declare income and file tax returns.

• Vet Tenants Carefully
◦ Choose tenants with stable employment and strong references.

• Secure Adequate Insurance
◦ Landlord insurance can protect against non-payment and legal costs.