Buying a property to rent it out is one of the most widespread investment strategies in Mallorca. The island combines constant tourist demand with a growing residential rental market, making it an attractive scenario for those seeking to generate recurring income through real estate. But between the idea and actual profitability lies a series of decisions that are best made with information and sound judgement.
Holiday or residential rental: two models, two realities
The first decision when buying to rent is defining what type of rental you want to offer. Both models have different implications for income, management, taxation and regulation, and the choice depends as much on your objectives as on the property’s location.
Holiday rental generates higher income per night, especially during peak season (June to September), but involves more active management: cleaning between guests, customer service, frequent maintenance and compliance with Balearic tourism regulations, which require a specific licence and limit the number of available places. In the Balearic Islands, holiday rental regulation is strict and has tightened in recent years, so verifying legal feasibility before purchasing is essential.
Long-term residential rental offers more stable and predictable income, with less property wear and simpler management. Demand for residential rental in eastern Mallorca is growing steadily, driven both by remote-working professionals and international families seeking to settle before buying. According to data published by Diario de Mallorca on foreign buyer demand, international purchasing pressure remains high, which also pushes rental prices upward in the area.
Location: the factor that determines profitability
Not all areas of eastern Mallorca offer the same profitability potential, and choosing the right location is the most important decision you will make as an investor. Proximity to the sea, available services and the target tenant profile directly influence the income you can expect.
Cala Ratjada and Cala Millor are the towns with the highest holiday rental demand in the east, thanks to their beach offering, dining options and moderate nightlife. They are interesting options for one- or two-bedroom apartments aimed at the European tourist.
Market data: Gross rental yield in eastern Mallorca ranges between 4% and 6% annually, depending on location, property type and rental model. New-build properties tend to offer lower initial gross yield but greater medium-term appreciation and lower maintenance costs. These figures are indicative and may vary according to the specific conditions of each property.
For residential rental, municipalities such as Son Servera, Artà or Capdepera are more attractive, as they offer comprehensive services for families and an international community seeking stability. Two- and three-bedroom properties with parking are the most sought-after in this segment.
Rental taxation: what you need to know before investing
The real profitability of a rental investment is not measured solely by gross income, but by what remains after taxes, community fees, maintenance and insurance. Understanding rental taxation in Spain is essential for calculating your net return.
Rental income is taxed under IRPF (personal income tax) for Spanish tax residents, with the option to deduct expenses such as mortgage interest, property tax (IBI), insurance, community fees and property depreciation. In the case of long-term residential rental, a significant reduction on net income exists that improves the tax return.
For non-tax residents, rental income is taxed through the Non-Resident Income Tax (IRNR). EU residents can deduct expenses directly related to generating the income, which reduces the taxable base.
Important: Rental taxation has significant nuances depending on your personal situation, tax residency and type of rental. Always consult a specialist tax adviser before making investment decisions. If you are considering the purchase process as a non-resident, our article on the guide to buying property in Spain for foreigners can guide you through the first steps.
Associated costs and maintenance: the real profitability
Beyond the purchase price, a property intended for rental generates recurring expenses that you must factor into your profitability calculation. Community fees, property tax (IBI), home insurance, routine repairs and management costs (if you hire a property management company) can represent between 20% and 30% of gross annual income.
In new-build properties, maintenance costs during the initial years are significantly lower than in resale properties. Modern installations, efficient insulation and legal guarantees reduce surprises and allow more reliable financial planning.
If you opt for holiday rental, add the costs of professional cleaning between guests, the booking management platform and possible tourist tax payments. These expenses can reduce the net margin if occupancy does not reach optimal levels outside peak season.
Tenant profile and demand in eastern Mallorca
Knowing the tenant profile you will target helps you choose the most suitable property and set realistic expectations for occupancy and income.
In eastern Mallorca, the typical holiday tenant is a European family or couple aged between 35 and 55, with medium-high purchasing power, seeking tranquillity, nature and authenticity over mass tourism. For this profile, properties with a terrace, parking and good location relative to coves and local restaurants are the most attractive.
The residential tenant is usually an international professional who works remotely, a family relocating for quality of life, or a European retiree seeking a pleasant climate and a safe environment. This profile values nearby services, the international community and construction quality above immediate proximity to the beach.
Frequently asked questions about buying property to rent in Mallorca
What return can I expect from rental in eastern Mallorca?
Gross rental yield in eastern Mallorca ranges between 4% and 6% annually, depending on location, property type and rental model. Holiday rental can generate higher gross income during peak season, but with greater seasonality. Residential rental offers more stable income throughout the year. These figures are indicative; consult a professional for your specific case.
Do I need a licence to rent to tourists in Mallorca?
In the Balearic Islands, it is mandatory to hold a tourist licence to offer holiday rental. Regulations are strict and limit the number of available places, especially in residential areas. Before buying with the intention of renting to tourists, verify with the corresponding local council whether the property can obtain a licence. Non-compliance can result in significant financial penalties.
Is it better to buy new-build or resale for rental?
Both options have advantages. New-build offers lower initial maintenance costs, legal guarantees of up to 10 years, better energy efficiency and greater appeal for demanding tenants. Resale may offer lower entry prices and initially higher gross yields, but with greater risk of unforeseen repairs. The decision depends on your time horizon and investment strategy.
What taxes do I pay on rental income in Spain?
Spanish tax residents pay tax on rental income through IRPF, with the option to deduct expenses and, for residential rental, apply a reduction on net income. Non-residents from the EU are taxed through IRNR and can deduct directly related expenses. Important: Always consult your tax adviser to calculate your specific situation, as regulations have relevant nuances for each case.
What type of property is most in demand for rental in eastern Mallorca?
For holiday rental, one- or two-bedroom apartments with a terrace and proximity to the beach are most in demand, especially in Cala Ratjada and Cala Millor. For residential rental, two- or three-bedroom properties with parking in municipalities with comprehensive services such as Son Servera or Artà have the highest demand. In both cases, construction quality and outdoor spaces are differentiating factors.