Vacation rental profitability (VTV/ETV): what to check before investing in Alcudia

Vacation rental in Alcudia can be an excellent source of income, but requires planning, initial investment and strict regulatory compliance. This guide analyzes real profitability, licenses, costs and key factors to maximize your investment return.

Legal framework: VTV/ETV licenses in Balearics

What is a VTV/ETV license?

• VTV (Vacation Tourist Housing): License to rent complete properties
• ETV (Tourist Stay in Housing): Similar, current term in Balearics
• Mandatory: Without it, fines of €40,000-400,000 depending on severity
• Transferable: Sold with property

Restrictions in Alcudia (2025)

• Moratorium: NO new licenses granted in saturated areas
• Permitted zones: Mainly residential developments outside center
• Prohibited zones: Alcudia old town, Port d'Alcudia center
• License market value: €50,000-120,000 (only transferable with property)

Potential profitability: real numbers

Example: 4-bedroom villa in Alcudia residential area

• Initial investment: €1,200,000 (property with license)
• High season (July-August): €3,500-4,500/week (8 weeks = €32,000)
• Mid season (May-June, Sept): €2,500-3,200/week (8 weeks = €22,400)
• Low season (April, Oct): €1,800-2,200/week (4 weeks = €8,000)
• Total annual gross income: €62,400 (20 weeks occupied)

Annual operating costs

• Professional management (20%): €12,480
• Cleaning between guests: €150 × 20 = €3,000
• IBI (property tax): €1,800
• Community fees: €1,200
• Utilities (electricity, water, wifi): €2,400
• Maintenance and repairs: €3,000
• Home + liability insurance: €800
• Bedding, replacement: €1,200
• Marketing (Airbnb, Booking): €3,120 (5% commission)
• Total costs: €29,000/year

Net profit

• Gross income: €62,400
• Operating costs: -€29,000
• Net profit: €33,400/year
• Return on investment: 2.8% gross annual
• Plus appreciation: 4-6% historical annual in Alcudia
• Estimated total return: 6.8-8.8% annual

Factors affecting profitability

Location within Alcudia

• Beach frontline: +30-40% in rates, 90% occupancy
• With private pool: +25% in rates
• Near services (Port d'Alcudia): Higher mid-season occupancy
• Sea views: +20% in price per night

Features increasing bookings

• Heated pool (+15% winter occupancy)
• Air conditioning in all bedrooms (essential)
• High-speed fiber WiFi (fundamental post-COVID)
• BBQ and well-maintained outdoor area
• Private parking (highly valued)

Management: self-managed or professional?

Professional management (recommended)

• Commission: 18-25% of income
• Included services: Platform listing, 24/7 customer service, check-in/out, cleaning, maintenance
• Advantages: No worries, rate optimization, better occupancy
• Local companies: Several specialized in Alcudia

Self-management

• Commission savings: Yes, but requires time and presence
• Challenges: Emergencies, complaints, cleaning, keys
• Viable if: You live in Mallorca or have trusted local contact

Rental platforms

Airbnb

• Commission: 3% host + 14% guest
• Advantages: Greater international visibility, strong review system
• Audience: Families, friend groups, 7-14 day stays

Booking.com

• Commission: 15-18% depending on category
• Advantages: Professionalism, consolidated European audience
• Requirements: More demanding in quality and services

Vacation rental taxation

Taxes to pay

• IRPF (income tax): Income taxed as real estate capital returns
• Deductible: IBI, community, utilities, depreciation (3%), mortgage interest, insurance
• Tourist tax: €2-4 per night and guest (depends on season), charged to guest but you pay it
• VAT: Exempt (tourist accommodation without hotel services)

Simplified tax example

• Gross income: €62,400
• Deductible expenses: €29,000
• Taxable base: €33,400
• IRPF (19-23% depending on bracket): ~€7,000
• Net profit after taxes: ~€26,400 (2.2% on investment)

Risks and considerations

Changing regulation

• Balearic government may tighten restrictions (already has)
• Possible new taxes or tourist fees
• Rental day limitations (some zones max 90-120 days/year)

Property wear

• Intensive use accelerates deterioration (paint, furniture, appliances)
• Budget 3-5% of property value in annual maintenance

Occupancy not guaranteed

• Estimates based on 20 weeks occupied (50% of year)
• Bad years (crisis, weather) can drop to 30-40%
• High competition in Alcudia (many VTVs)

Is it worth it in 2025?

YES, if...

• Property ALREADY has ETV license (essential)
• You seek combined return (rental + appreciation)
• You have professional management or live nearby
• You can handle low occupancy periods
• Your investment horizon is 7-10 years minimum

NO, if...

• Property doesn't have license (you can't rent legally)
• You seek only high short-term return (<5 years)
• You can't handle contingencies (breakages, complaints)
• You want to use house more than 6 months per year (incompatible)

Alternative: long-term rental

Less profitable but more stable option

• Annual rental: €1,800-2,500/month (4-bed villa)
• Annual income: €21,600-30,000
• Lower costs: No weekly cleaning, less wear
• Advantage: Predictable income, less management, careful tenants
• Disadvantage: Lower profitability (~1.8-2.5% vs 2.8% VTV)

Conclusion: investment or business?

Vacation rental in Alcudia is more a complement to real estate investment than a highly profitable business alone. Real profitability (~2.8% net) is modest, but added to historical appreciation (4-6% annual), offers interesting total return.

The key is buying well (with license), managing professionally and having long-term horizon.