When buying a secondary residence in Morocco for rental investment, the nature of the property acquisition is different from that of a lifestyle investment choice - the focus should remain strictly on anticipated rental return (immediate revenue) and return on invested capital (upon sale). Depending on the nature and location of your Moroccan property for rental and what your usage requirements are, there are a number of possible rental opportunities, as in the table below:

A) Long term letting (6 months +): 5% - 10% per annum (gross).

1 month’s rent (agency commission) or 20% for management services.

B) Short term letting (1-5 months) 5% - 15% per annum (gross).

20% agency commission for management services.

C) Managed rental/holiday letting: (3 nights +): 10% - 20% per annum (gross).

20% agency commission for management services.

DETAILS EXPLAINED:

A) Long term letting in Morocco.

This is the most typical rental option. The rental agency will advertise your property and search their network / database to find a tenant. Once a tenant has been found, the agency will prepare the tenancy agreement (contrat de bail), which must be signed and legalised. The agency should conduct an inspection before the tenants move in and once s/he moves out, as well as creating an inventory of furniture etc. The tenant pays the owner directly at predetermined intervals. Note: It is standard practice to mandate multiple estate agents to rent your property on your behalf in Morocco. The mandate between property owner and estate agent is deemed non-exclusive.

B) Short term letting in Morocco.

A short term let is identical in nature to long-term let but may be preferable if, as the owner, you have fixed periods during the year when you wish to occupy your Moroccan property, e.g. during the winter months.

C) Managed rental / holiday letting in Morocco (La gestion locative).

This service is offered by a small number of agencies as well as some professional individuals in Marrakech. Management services come at a cost – generally 20%, yet managed rental does provide many organisational benefits – the agency comprehensively manages the rental and maintenance of your property for you and provides valuable customer service for your rental clients. Combine this to the potential to generate up to 25% gross return on investment whilst retaining the liberty to make use of your property personally if and when you wish, and short term letting is certainly worth considering.

In principal, a managed rental service is based on a contract where the property owner mandates the rental management agency to rent and administrate the property. This involves the agency executing the owner’s wishes (within reason), managing the personal obligations of the owner with regard to the property as well as those towards fellow residents/neighbours and finally; - providing civil and legal representation on the owner’s behalf.

The service typically involves:

• Collecting rental monies from the clients who rent the property; these can be deposited directly to the owner’s Moroccan bank account (less the fees & expenses)

• Rendez-vous with the client in Marrakech to introduce him/her to the apartment

• Payment of utility bills

• Undertaking any necessary repairs (building, electrical, plumbing etc.)

• Insurance – Taking out a contents and damages policy and reporting any damage or loss

• General administration of bills and paperwork

Other than the great investment return, the main advantage of opting for this form of rental is the freedom it allows you as the owner to make use of your property as much or as little as you like. The agency will not enforce a minimum rental quota per year. This rental method can prove quite lucrative for properties which are in demand with holiday and weekend visitors, i.e. luxury apartments in central Marrakech. See the rental indicators section below for more details.

Note: Beware of "Rental Guarantees". A managed rental service is not to be confused with guaranteed rental return scheme. Although very rare, some agencies may offer you a guaranteed rental return scheme - alluring you with a guaranteed return of X% per annum from the rental of your property, at a cost of next to nothing to you. Such schemes are to be avoided since they are conducive to filling the property with clients 365 days a year, whether said clients are desirable or undesirable.

RENTAL APPRAISAL:

In order to choose the rental strategy most suited to you, it is useful to estimate the potential rental return your property will generate. The following indicators relate only to apartments since villas vary greatly in nature and importance, thus, their rental value cannot be accurately estimated through the use of these indicators).

MARRAKECH LONG TERM RENTAL:

Source: Challenge - L'argus de l'immobilier Jan - Mar 2010 Edition (Challenge is a leading news review published weekly in Morocco. L'argus de l'immobilier quarterly special edition is considered the No. 1 price barometer for real estate throughout the Kingdom of Morocco).

KEY:

• Location / apartment description / size

• Rental values (Dhs per month)

• Variation in value since last quarter

Gueliz, Lounge + 1 bedroom, 40m2 - 80m2

Minimum: 3,500 dhs (320 EUR)

Average: 4,850 dhs (430 EUR)

Maximum: 6,500 dhs (580 EUR)

Variation: +1%

Gueliz, Lounge + 2-4 bedroom, 70m2 - 150m2

Minimum: 5,500 dhs (490 EUR)

Average: 7,000 dhs (625 EUR)

Maximum: 10,000 dhs (890 EUR)

Variation: Equal

**

Hivernage, Lounge + 1 bedroom, 40m2 - 80m2

Minimum: 5,500 dhs (490 EUR)

Average: 5,850 dhs (520 EUR)

Maximum: 7,000 dhs (625 EUR)

Variation: +1%

Hivernage, Lounge + 2 bedrooms, 70m2 - 120m2

Minimum: 7,000 dhs (625 EUR)

Average: 9,350 dhs (830 EUR)

Maximum: 13,000 dhs (1,160 EUR)

Variation: +0.5%

Hivernage, Lounge + 3-4 bedrooms, 130m2 - 150m2

Minimum: 10,000 dhs (890 EUR)

Average: 11,700 dhs (1,050 EUR)

Maximum: 16,000 dhs (1,430 EUR)

Variation: Equal

MARRAKECH SHORT TERM RENTAL:

Rented by night, apartments in Gueliz can typically be rented at the following rates (prices vary according to season, location and quality of apartment; consult a professional for further advice):

KEY:

• Location / apartment description / size

• Rental values (Dhs per night)

Gueliz, Studio or Lounge + 1 bedroom, 40m2 - 80m2

Minimum: 400 dhs (35 EUR)

Average: 500 dhs (45 EUR)

Maximum: 800 dhs (70 EUR)

Gueliz, Lounge + 2 bedrooms, 70m2 - 120m2

Minimum: 600 dhs (53 EUR)

Average: 1,000 dhs (90 EUR)

Maximum: 1,600 dhs (140 EUR)

TAX ON RENTAL INCOME

International investors looking to operate a buy-to-let strategy with their investment property in Morocco will be required to pay tax on this generated income. The first three years can be exempt of tax, but afterwards investors must pay tax on 60% of their generated income at levels between 22% and 44%.

Municipal Tax For Rental Properties: if investors do not live in the property at all, a tax of 13.50% on the rental value is levied.

General Municipal Tax: in Morocco, property owners are required to pay an annual property tax. The first five years are exempt. After this, tax is due based on the annual rental value of the property. The table below gives an approximate guide to the taxes due:

• Less than 3,000 dhs - 0%

• Between 3,001 and 6,000 dhs - 10% (25 - 50 EUR PA)

• Between 6,001 and 12,000 dhs - 16% (75 - 160 EUR PA)

• Between 12,001 and 24,000 dhs - 20% (200 - 420 EUR PA)

• Between 24,001 and 36,000 dhs - 24% (500 - 750 EUR PA)

• Between 36,001 and 60,000 dhs - 28% (900 – 1,500 EUR PA)

• More than 60,000 dhs - 30% (1,600 EUR PA)

Capital Gains Tax: if the property is sold within five years, capital gains tax is charged at 20% of profit with a minimum of 3% of the sale price. A property sold between six and ten years of ownership will pay 10% capital gains tax and 0% thereafter. Capital gains tax is based on the sale price less the purchase price.

Inheritance Tax: there is 0% inheritance tax for family members, but it is essential to make a legal Moroccan will and seek professional tax advice beforehand.

UK-Morocco Tax Treaty: there is a double tax treaty in place between Morocco and the UK and this protects the investor from being liable for capital gains tax in both countries.

Corporate Tax: if you are considering investing in multiple property units in Morocco, it may be an idea to consider creating a Moroccan private limited company. Your Moroccan notary will be able to advise on the most efficient way to do this.

TO SUMMARISE:

A large number of real estate agencies in Marrakech offer the above mentioned rental services. Whether you are buying a property for pure rental investment or if you wish to make some use of the property as well as renting, a professional rental appraisal and agent is a very good idea.