Looking to buy investment property in Madrid? It’s a sound choice, yet one that must be executed correctly. This article tells you about buying investment property in Madrid, the types of deals available and the likely returns. Remember, buying property in Madrid has, on average, yielded in excess of 8% returns per year, and significant capital asset growth.
Buying investment property in Madrid with cash outright is also a sure fire hedge against any rise in interest rates. Some investors look to buy properties in need of renovation or a change of purpose. They then renovate those properties and rent them out on a long term or short terms basis. Many investment properties in Madrid are purchased by non Spanish Nationals and are either used as a holiday homes or straightforward by and hold investments in Madrid.
Once these properties have been renovated and rented then investors in Madrid may refinance the property by taking a mortgage over the property at a higher value, using the income to pay the mortgage and reinvesting the profit from the deal into more property in Madrid or elsewhere.
How easy is it to buy investment property in Madrid?
Buying an investment property in Madrid might be more complex, but Spain is a very welcoming country for foreign buyers as foreign ownership of properties in Madrid has really helped lift and stabilize the local economy.
The procedures for buying a property in Spain as an expat are relatively straightforward. Before buying, you’ll require a financial number, which can be obtained by visiting a police station with your passport. This is typically processed on the same day for Spanish or EU citizens, but may take a little longer for other nationalities.
Financing an investment property in Madrid can be done by cash or mortgage charge. It is often easier for expats to finance the purchase from their home country. Pre 2008 many Spanish banks in Madrid would lend to international investors although they have been reluctant to do again, so even now.
What is the average price of investment property in Madrid?
Average property costs per square meter in Madrid are €1,722 per square meter, representing a solid, year on year growth trajectory of 8%.
Map of Madrid
Madrid ( mə-DRID, Spanish: [maˈðɾið]) is the capital and most populous city of Spain. The city has almost 3.4 million inhabitants and a metropolitan area population of approximately 6.7 million. It is the second-largest city in the European Union (EU), and its monocentric metropolitan area is the third-largest in the EU. The municipality covers 604.3 km2 (233.3 sq mi) geographical area.
Madrid lies on the River Manzanares in the central part of the Iberian Peninsula. Capital city of both Spain (almost without interruption since 1561) and the surrounding autonomous community of Madrid (since 1983), it is also the political, economic and cultural centre of the country. The city is situated on an elevated plain about 300 km (190 mi) from the closest seaside location. The climate of Madrid features hot summers and cool winters.
The Madrid urban agglomeration has the second-largest GDP in the European Union and its influence in politics, education, entertainment, environment, media, fashion, science, culture, and the arts all contribute to its status as one of the world’s major global cities. Due to its economic output, high standard of living, and market size, Madrid is considered the major financial centre and the leading economic hub of the Iberian Peninsula and of Southern Europe. The metropolitan area hosts major Spanish companies such as Telefónica, Iberia, BBVA and FCC. It concentrates the bulk of banking operations in the country and it is the Spanish-speaking city generating the largest amount of webpages.
Madrid houses the headquarters of the UN’s World Tourism Organization (UNWTO), the Ibero-American General Secretariat (SEGIB), the Organization of Ibero-American States (OEI), and the Public Interest Oversight Board (PIOB). It also hosts major international regulators and promoters of the Spanish language: the Standing Committee of the Association of Spanish Language Academies, headquarters of the Royal Spanish Academy (RAE), the Instituto Cervantes and the Foundation of Emerging Spanish (FundéuRAE). Madrid organises fairs such as FITUR, ARCO, SIMO TCI and the Madrid Fashion Week. Madrid is home to two world-famous football clubs, Real Madrid and Atlético Madrid.
While Madrid possesses modern infrastructure, it has preserved the look and feel of many of its historic neighbourhoods and streets. Its landmarks include the Plaza Mayor, the Royal Palace of Madrid; the Royal Theatre with its restored 1850 Opera House; the Buen Retiro Park, founded in 1631; the 19th-century National Library building (founded in 1712) containing some of Spain’s historical archives; many national museums, and the Golden Triangle of Art, located along the Paseo del Prado and comprising three art museums: Prado Museum, the Reina Sofía Museum, a museum of modern art, and the Thyssen-Bornemisza Museum, which complements the holdings of the other two museums. Cibeles Palace and Fountain has become one of the monument symbols of the city. The mayor is José Luis Martínez-Almeida from the People’s Party.
Making Money on Investment Property in Madrid
The best way to make money on Madrid Property is via an expert international investment fund.
Your Financial Advisor or Accountant won’t bring you the opportunities because of course they won’t receive their greasy commissions.
Investment funds are not even allowed to advertise so you’ll never hear of them unless a friend recommends them.
You will need at least some experience with previous investments to be eligible and of course these funds are extremely picky about the investors they accept. They can afford to be. They don’t need your money, but they can put your money to work for you like never before.
Costs of buying a property in Madrid
Fees for buying a property in Madrid vary from area-to-area. There are no fixed fees for lawyers or estate agents. Buyers must pay the costs:
Property transfer tax in Madrid: 6–10% (existing properties) / VAT (or IVA) at 10% (new properties in Madrid)
Notary costs, title deed tax, and land registration fee in Madrid: 1–2.5%
Legal fees for buying investment property in Madrid: 1–2% (including VAT)
The seller usually pays the estate agent fees in Spain. Estate agents usually charge their fees as a percentage, typically around 3% of the final sale price.
Who is the Best Real Estate Agent in Spain?
Physis Realty estates is a multi-award winning Luxury Real Estate broker in Madrid, with a 18 year track record the agency has been directly or indirectly responsible for the largest volume of transactions in Madrid in the past two decades.
Types of investment property in Madrid
It is important to understand the main types of Investment Property in Madrid
The Most Successful Property Investment Fund 2020 : Click Image to Download Prospectus
Buy to hold in Madrid
Long-term rental property in Madrid is widely considered one of the best ways to diversify your property portfolio. So buying and owning property means much more than just investing in a single property, it can bring you a variety of benefits, such as access to a variety of investment opportunities and the benefits of long-term ownership.
While some investors in Madrid may be confused or intimidated when they start, buying and owning property can be one of the best investments you can make if you do your due diligence before you start.
The rental income from investment property in Madrid generates short-term income that can be used to pay off a mortgage or to invest money. The strategy of buying and holding property is one of the most common investment options.
The value of the Madrid property will increase over time and the investor will benefit if he is willing to sell it later. The investor benefits from being bought in the expectation that the value of the property will rise over time.
Investors considering a Madrid property purchase and holding strategy should do their best to calculate the potential income from renting out the property. The bottom line is that monthly income should exceed the cost of rent in the first year of ownership and annual rental income over the next five years.
If the investor plans to sell the Madrid property later, possible profits should also be taken into account. Finally, any losses from taking out a mortgage or other type of property financing must be taken into account, as well as any gains from the sale.
Convert Madrid property to Holiday Accommodation
For property investors in Madrid, converting a home into a serviced apartment would mean higher rents than the normal rent increase. As a result, many people are buying investment property in Madrid and then converting these homes into serviced apartments to maximize yield.
The types of property used for serviced accommodation in Madrid are often the same as those you would use to buy to let. Where you have a guaranteed short-term rent, it’s not as rigid as renting out a property.
Lease Madrid property to the Worlds Best Rehab
Remedy Wellbeing is a bespoke, luxury treatment center with a significant corporate footprint in Spain. This means they treat just one client at a time in luxury 6* accommodations. All properties used by Remedy Wellbeing are as unique as they are inspiring. If you own or represent some of the most exceptional, unique and luxurious accommodations in Spain, Remedy Wellbeing can be contacted via their dedicated property management company, Property Secured Investments.
Disadvantages of investing in Serviced Accommodation in Madrid
Holiday accommodation is more of a business strategy than a property strategy, and the workload is far more intensive.
You’ll need to furnish your holiday rental accommodation in Madrid
You’ll need to clean the rooms and change the sheets every time your guests leave.
Who does all the laundry?
Who does all the cleaning?
Who’s going to do all the work for you in Madrid
How are the guests actually going to get in?
Are you going to have somebody to do a meet and greet?
Buying investment property in Madrid to convert into serviced accommodation or holiday lets is not really considered an investment, because the amount of work involved make it a full time job.
Alexander Bentley leads Remedy Investments™ a private equity fund specializing in operational real estate. Remedy Investments™ has significant expertise in developing Luxury ApartHotels across Europe and the wider APAC region.
Alexander Bentley is the creator & pioneer behind Remedy Wellbeing Hotels & Retreats. Under his leadership as CEO, Remedy Wellbeing Hotels™ received the accolade of Overall Winner: International Wellness Hotel of the Year 2022 by International Rehabs.
Because of his incredible work, the individual luxury hotel retreats are the world’s first $1 million-plus exclusive wellness centers providing an escape for individuals and families requiring absolute discretion such as Celebrities, Sportspeople, Executives, Royalty, Entrepreneurs and those subject to intense media scrutiny.
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