I wish I could say that finding a great investment property in Madrid was something simple, but that’s just not the case. The good news is, however, that since 2016 the market is once again increasing after several years of misery.
Before making any kind of investment you have to ask yourself, what is the goal of my investment? Do you want to buy to later sell for a profit? Or do you want to setup monthly income from renting?
Buying Property in Madrid for Capital Appreciation
The areas of Madrid that have devalued the least over the recent bust are the properties in the best neighborhoods of Madrid, like barrio Salamanca and El Viso. As with most large cities, prices don’t tend to drop in the best locations as they are always in demand. So these areas are not ideal to take advantage of better purchase prices and expected appreciation.
The areas that have the best prices for residential real estate in Madrid currently are the poorer neighborhoods in the south like San Cristobal and Vallecas. Nevertheless, these basement price properties made not appreciate quickly either.
The potentially most promising area for capital gains in Madrid is with your very average neighborhoods around the city. These are the safe, decent neighborhoods where your normal Spaniard with moderate earnings live. Prices have come down far from 2010, so you can buy at a great price and most likely be able to sell at a higher price within a few years. You could also find rundown properties for the right price, refurbish them and sell for a nice gain. These type of neighborhoods would be areas like Peñagrande, Barrio del Pilar, Hortaleza and Tetuan.
It’s also important to mention commercial real estate in these neighborhoods. Commercial properties like offices and especially shops at street level have dropped through the floor. Some shops can be purchased for half the cost of an equivalent residential property of the same size. If you can put the commercial property to good use it could be a great investment for selling in the future at a higher price. Be warned, however, that shop owners in Spain aren’t doing great, so think twice before buying a commercial premise for rentals.
Buying Property in Madrid for Rental Income
Rents in Madrid have been outpacing price increases, which is great for cash flow investors looking to setup up rentals.
If you want the most bang for your buck then, as suggested already in this article, you may want to check the poorer neighborhoods of Madrid like Puente de Vallecas. Some sources site yields up to 10% in these areas. There is, however, the risk of renting to bad elements or renters who may struggle to make payments from month to month.
On the opposite end of the spectrum we have the luxury spots also mentioned above. Here at Europe Real Estate we work the area of La Moraleja where rents range from 2000-6000 per month. If you’re not concerned about squeezing the maximum out of every euro and want something simple with a high rent payment each month then this area is for you. Buy 2 properties in La Moraleja and you can retire on the rents alone.
If you are searching for the best value for your money without high risk then again the more common modest areas of Madrid like Peñagrande, Barrio del Pilar, Hortaleza and Tetuan will give decent yields (5-7%).
If you’re searching for a great deal, while this is still a buyer’s market, it’s not easy to find. I would suggest speaking with someone who really has a foot in the market and could maybe spot some great bargains.