Is Buying property in mallorca a good investment?

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Mallorca - A Stunning Place To Live Or Spend Time In

Mallorca, as the largest island in the Balearic Islands, has the most advanced infrastructure in the Balearics and attracts a plethora of national and international investors.

It’s not only the most dynamic real estate market in the area, but also in the entire Mediterranean. Mallorca is widely regarded as the premier location for second-home investment, attracting a whole new generation of purchasers in the last few decades.

Purchasing a property in Mallorca is widely regarded as a solid investment, with all the advantages of an exclusive second residence in the sun.

The island's wide appeal stems from its diverse landscape, mild climate, culture, and sophisticated infrastructure with its excellent car network and fast internet access making it easier for people to base themselves here for longer periods. This provides enormous benefits to the island, not only in terms of year-round accessibility but also for investment in a high-quality infrastructure, a crucial factor for investors.

Mallorca is also regarded as a safe place to live and spend time, and is home to numerous personalities, celebrities, politicians, and royals, including the Spanish Royal Family, who spend their summer vacations there each year.

Whereas authentic Mallorcan traditions and family life are central to the essence of the island's society, maintaining the island's safety and security is of paramount importance to all concerned as Mallorca is proud of its reputation as a safe harbour for all its inhabitants.

The question of whether real estate is a viable investment in the present day is one that many people ask. A better question would be whether rental properties can be profitable investments.

Real estate here is traditionally regarded as a solid and rewarding investment. It can generate recurring income through rental income. In addition to appreciating in value over time, the cash value of the property or land that you purchase can be a wise investment. Nonetheless, you must be prepared if you wish to invest here as there are numerous pitfalls to avoid!

For those exploring the potential to buy investment property in Mallorca, purchase a property for rent in Mallorca, or to buy a second home in this idyllic island, this blog is for you.

We'll explore the investment prospects, how to find your perfect property, and the allure of Mallorca for discerning investors.

Investing in Mallorca: A Lucrative Opportunity

Mallorca, often synonymous with luxury living, offers a wealth of opportunities for property investors. Whether you're looking for capital growth or a steady rental income, Mallorca's real estate market has something to offer.

- Buy Property to Rent in Mallorca: The island's tourism boom ensures a constant influx of visitors, making the rental market robust. Buying a property for rent can yield a consistent income stream.

- Buy A Second Home in Mallorca: For those seeking both an investment and a personal retreat, Mallorca is an ideal choice. A second home here provides your own personal piece of paradise.

Mallorca has many investment-worthy properties. From luxurious contemporary villas in the Southwest to substantial estates and quirky fincas in the Central and North parts of the island. Property across the island is currently only predicted to keep growing in value. The scarcity of prime real estate, combined with Mallorca's enduring appeal, means that it is likely to be a sound investment if you do your research and buy for a reasonable price.

What Should You Expect From Your Mallorca Property Investment?

An excellent Mallorca real estate investment would have the following characteristics:

  • A return of 4% per year after deducting all expenses

  • Acquiring the property at a discount to the market value (admittedly hard to do when demand far exceeds supply)

  • A desirable location – if you intend to rent it to holiday makers it should be in an area with excellent access and within short distance to the sea and beach, restaurants, etc.

The area with the highest predicted capital growth is the Southwest though most other areas are also predicted to grow in value.

If you intend to purchase an investment property in Mallorca, you must consider the total purchase price, including the transfer and VAT taxes, as well as the annual operating expenses.

Sometimes it is easier to rent your property through a Mallorca rental company and contract with them for the property's complete management. This alleviates a portion of the responsibility of maintaining your villa or apartment. You must price your rental property so that all of these fees and other costs are covered in full. Additionally, you should set aside the first few months' surplus funds to cover the cost of property maintenance. You should also carry adequate property insurance and be prepared to deal with additional costs and other unforeseen circumstances.

If you are purchasing land to sell at a later date, you must conduct extensive investigation on the land deed. Determine if any roads are planned in close proximity to the land you intend to buy, and consider how this will influence the property's value. Sometimes it will increase the value of the land, and sometimes it will decrease it. Once you have done the investigation, you should be able to make the correct decision about purchasing it for investment.

You must price your rental property so that all of these fees and other costs are covered in full. Additionally, you should set aside the first few months' surplus funds to cover the cost of property maintenance. You should also carry adequate property insurance and be prepared to deal with additional costs and other unforeseen circumstances.

If you are purchasing land to sell at a later date, you must conduct extensive investigation on the land deed. Determine if any roads are planned in close proximity to the land you intend to buy, and consider how this will influence the property's value. Sometimes it will increase the value of the land, and sometimes it will decrease it. Once you have done the investigation, you should be able to make the correct decision about purchasing it for investment.

When searching for your ideal investment property in Mallorca, several factors come into play:

  • Location Matters: Proximity to beaches, amenities, and attractions can significantly impact rental income and property appreciation.

  • Scenic Views: Properties boasting stunning vistas of the sea or mountains tend to attract more renters and greater capital appreciation.

  • Rental Potential: Investigate the property's rental history and its potential for attracting tourists or long-term renters.

  • Maintenance: Consider the maintenance requirements of the property, as upkeep costs can affect your returns

Learn more by downloading our FREE indepth Mallorca Property Report

The Rental Market in Mallorca: Short-Term vs. Long-Term

Before you purchase a property to rent out on a short- or long-term basis, you should consider a number of factors. The most effective method is to save money and pay cash for the house.

At the very least, you must be able to comfortably afford the mortgage payments when the property is vacant; otherwise, the property may become a burden rather than a source of wealth.

Long-Term Rentals: For consistent, stable income, consider long-term rentals. They require less frequent turnover but offer lower rental yields.

Short-Term Holiday Lets: Mallorca's tourist influx ensures steady demand for short-term holiday rentals. These can provide higher income during peak seasons. They attract at least 4 times the rent you would get from a long-term rental. If renting your property to tourists, securing a holiday rental license is essential. Regulations can vary by region in Mallorca, so ensure you meet local requirements.

While non-residents can obtain mortgages in Spain, it's crucial to understand the criteria and processes. Consult with local financial experts for guidance. Currently (as of late 2023) long-term fixed rates are available at around 3.5 - 4% with La Caixa and Sabadell, and you can often obtain discounts to the rates by taking out additional services such as property and contents insurance and health insurance.

If you are considering obtaining a loan from a local bank to finance the purchase of an investment property, you must be aware of all legal requirements and prerequisites. For instance, foreign purchasers are required to possess NIE documents. It is also essential to note that the downpayment percentages for foreign investors (approximately 30 percent) are higher than for Mallorca residents.

Legal Fees, Taxes, and Planning Issues

Investing in property in Mallorca can be a minefield. Before investing, you must ensure you thoroughly understand and grasp all the legal fees, taxes, and planning regulations related to property ownership in Mallorca.

To avoid purchasing the incorrect rental property in Mallorca, it is essential to rely on professional real estate agents and attorneys for guidance to help you navigate these aspects. For example, renting your Mallorca property to visitors without a valid holiday license can result in fines of up to €400,000.

Planning is also an issue and many properties have had building work done that is illegal to some extent – especially fincas or property on rustic land. Whilst it is unlikely you would be forced to demolish a house, you may not be permitted to do any work at all on properties that have not been built in accordance with the law.

On the other hand, the new regulations are increasing the demand for vacation homes and hotels with licenses, as many apartments are no longer an option for investors seeking to purchase short-term rentals in Mallorca.

Top Tips For A Successful Property Investment In Mallora

To optimize your property investment in Mallorca:

Undertake thorough research!

Dive into the local property market, regulations, and taxation specifics.

Downloading our Special Report on the  Mallorca Property Market would be a good starting point.

Knowing what to purchase as an investment property is equally as essential as knowing where the most lucrative Mallorca rental properties are located. Mallorca is a paradise island, attracting thousands of foreign purchasers and investors to the island to purchase real estate.

There is a vast selection of properties to choose from, including new developments, luxury villas, and apartments with a view of the sea, all of which generate a healthy cash flow due to the high demand from tourists and tenants seeking quality housing.
As an investor, it is essential to know what form of investment property meets your needs.
For instance, single-family residences with vacation licenses are ideal for short-term rentals on platforms like Owners Direct or Airbnb. In recent years, holiday rental laws have changed, and it is now illegal to rent out your property without a license.


To ensure that your investment property qualifies for a vacation rental license, you must rely on professional agents.

Purchase properties in Mallorca with holiday licenses.

Buying a villa or country estate with an existing holiday license is unquestionably the simplest method to generate an immediate cash flow from your investment property.

Investment properties in Mallorca with holiday licenses are in limited supply and high demand considering all the new laws changes prohibit many properties from being used as short-term or holiday accommodation.

Homes with vacation licenses have undergone a rigorous application process and met all legal requirements.

Invest in Mallorca apartments with a sea view

Although apartments in Palma are no longer permitted to be rented on a short-term basis, opulent apartments with a sea view can still be rented on a monthly basis for an attractive price.

Numerous expatriates and foreigners choose Mallorca for its pleasant climate and beaches, opting to rent seaside homes.

If you want to invest in real estate that is always in high demand, it is always a good idea to purchase a Mallorca property with a marine view.

Choose luxurious villas in the southwest of Mallorca

Compared to other countries and other regions of Spain, Mallorca has been comparatively unaffected by the consequences of the war in Ukraine. The solid real estate market on the island is sustained by the high quality of life and influx of foreign purchasers.

According to most expert estimates, the prestige real estate market in Mallorca will increase by 8% annually until 2025, with the Southwest of the island seeing the most activity. Numerous families who relocate to Mallorca choose to rent a luxury villa before purchasing one, so the rental market for villas is always stable.

On-site visit:

Whenever possible, visit Mallorca to explore potential properties and familiarize yourself with the area.

In conclusion, Mallorca's real estate market offers myriad opportunities for savvy investors. Whether you're searching for a long-term investment, a property to rent out, or a second home, Mallorca's allure is undeniable.

However, success demands careful planning, due diligence, and a clear investment strategy. With the right approach, Mallorca could indeed be your gateway to a profitable investment venture in paradise.

Local expertise

Develop a strong relationship with reputable estate agents, lawyers, and financial advisors well-versed in Mallorca's market or use the services of a property buying agent like Mallorca Blue and benefit from our contacts.