Madrid property investment: a Case study

Purchasing a “fixer-upper” and renovating it is one of the best ways to make money in property investing. This is particularly true in a city like Madrid, where the housing stock is old. This article explains why Madrid is such a good city for property investment, then shows a case study from one of Brian past clients.

Madrid is in the sweet spot for property investment

Madrid offers some of the best returns in Europe. The entry price is extremely low, and average returns on Madrid property investment are some of the best in Europe- particularly among leading capital cities.

Madrid and Barcelona are the top 2 main European cities in term of yields

according to Deloitte. Check the rental Yields for the major European Cities, Madrid and Barcelona have rental yields close to 5%.

If you want to read more on real estate investments in Spain, read our article we wrote a few weeks ago: What is the return on your Spanish property investment in 2018?… 10.9% according to the bank of Spain.

Madrid is the 3rd biggest city in Europe in terms of size…

Although Madrid property prices rose in 2017, there is still much room for appreciation. Prices are still 54% off their peaks of mid-2007.

Madrid is the 11th City in Europe in terms of price/m²

Source: Deloitte property Index 2017,  Overview of the European Residential Market

Moreover, Spain has some of the highest economic growth prospects in Europe. Remember, GDP growth in Spain is one of the biggest in Europe in 2018 as foreseen by the European Commission… Check our interactive chart (click on any country)

This, combined with efforts the Madrid Government has taken to build the city’s infrastructure and attract direct investment, augurs extremely well for property prices according to the team of Brian, our Property hunter in Madrid.

The icing on the cake? It could be Brexit. As businesses move out of London, many are choosing Madrid. In fact, The Guardian recently published an article detailing how the city stands to benefit from Brexit.

The benefits of apartment renovation

Being a successful property owner boils down to one thing: maximizing your rental yield. One of the easiest ways to do this is to buy a property relatively cheaply and refurbish it to improve its value. This is true in any market, but particularly so in Madrid.

The typical Madrid apartment is in an old building. Historically, they were divided into many small rooms and were often dark and rather forbidding. The city has been late to the game, compared with other European capital cities, in embracing the light-filled, open spaces that are so popular nowadays. Moreover, most Madrid apartments contain very old appliances- most lack dishwashers and dryers. Bathrooms rarely have modern showers and often lack the water pressure and/or boiler capacity for a proper bath.

Corporate clients and wealthier tenants prefer refurbished properties with modern conveniences such as dishwashers, microwaves and even wine refrigerators. Luxury and convenience rule the day. To meet these needs, one needs to do a full renovation. In the long-run, the money and time invested are well worth it.
In short, we have found that every additional 1€ our clients spend on refurbishment add an additional 1.5€ to the value of their apartment.

Case study: Calle de la Palma

This is typical of a renovation we managed for a client. The apartment is on Calle de la Palma, situated in the trendy neighbourhood of Malasaña. The street is a small side street, directly off the thoroughfare Calle de San Bernardo. Like many streets in old Madrid, it is narrow, lined with yellow and pink buildings trimmed in white. Houses are festooned with old gas lights and iron balconies- it is particularly evocative at sunset.

Relatively quiet at night, it has a number of excellent places to enjoy tapas. Bodegas el Maño, founded in 1927, is a traditional old bodega (wine shop) where you can still enjoy a glass of their speciality, wine from Zaragoza. Or if you like the new and fashionable, you can get a glass of wine and tapas at the sleek, sexy La Loca Juana. At the end of Calle de la Palma is the atmospheric Plaza de las Comendadoras. Here you will find a number of outdoor terraces and modern restaurants, such as Federal and Roll, mixed with traditional Spanish fare.

The renovation

This is what we call a “lifestyle renovation.” Our clients wanted a property they could use as a vacation home, but also rent for profit. After much looking, we found this property for them. Their total investment was 358,000€.

The apartment was a typical Madrid property- dark and forbidding with very few modern conveniences. Here is a before photo:

As you can see, the drop ceilings were very low, creating a hovel like effect

We opened up the drop ceiling to reveal the beautiful old wooden beams. We opened up walls, enabling the light and energy to flow freely through space. The kitchen and baths were re-tiled, although we retained some of the old touches to supply a bit of old-style Spanish flair. All appliances were modernized. Here is the final result:

The living room with opened up walls, enabling the light and energy to flow freely through space.

The kitchen was completely renovated, in a style which appeals to higher-end renters.

Old plumbing was replaced with modern sinks, toilets and showers. We let as much light into the apartment as possible.

We added luxurious touches to the Master Bedroom.

The smaller bedrooms let the light in and maximize the number of Airbnb guests.

Overall return

After five years their total overall returns, based upon a total initial investment of 358,000€, were as follows:

Read the September 2018 update from Brian on the Madrid real estate market: Madrid real estate prices are up 21%: Is this sustainable?

If you are looking to buy in Spain, we would suggest that you read our earlier paper on Property hunting: 6 essential reasons for loving your Spanish real estate shopper. This paper is very interesting and gives you some of the important reasons why working with a property hunter is very useful for foreigners looking to buy in Spain. You will find specific samples our independent local partners worked on in Alicante, Valencia, Barcelona and Madrid. If you are looking to buy a property in Barcelona, read our Barcelona “Case study” article of May 2018.

About Brian and his team, our Property hunter in Madrid.

We help clients locate, purchase and renovate property in Madrid. We also serve as a full-time property manager for those who wish to let their properties. We have a large portfolio of actively managed properties and have helped over three hundred clients find their dream homes and investments. Get in touch today if you’d like to learn how we can help you invest in Madrid.

Send your request to our property hunter in Madrid, or follow the link if you are looking for a property hunter anywhere else in Spain. Ask us directly and benefit from the strength of our network!

Check the full profile of Brian, our local partner, Property Hunter in Madrid

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On the 21st of April of 1992, the fast train was born in Spain

The first route to be open in Spain was the Madrid to Seville route with 471 Km. Since 1992, the network expanded to more than 3000 km and more than 11 different routes.

They call it the AVE “Alta VElocidad” train in Spain. To party on that, the Prime Minister, Mariano Rajoy, announced an “anniversary campaign” that should last one year where they will sell 250.000 tickets at 25€. The sales will take place on the 25th of each month.

A few facts on the AVE -fast train- in Spain

• 357 M passengers transported
• 20 M transported last year
• Occupancy rate higher than 85%
• On time arrival higher than 95%
• Speed average higher than 200km/h with the fastest speed of 350km/h
• Fast trains are competitive vs plane for ranges of up to 1200 km or the equivalent of 5 hours of travel
• 52 bn investments according to the Adif, the manager of the Spanish Rail Network
• 1500 km are under construction according to the Adif

What is the AVE network in Spain?

• Madrid – Seville AVE, Madrid Puerta de Atocha – Ciudad Real – Puertollano – Córdoba Central – Sevilla.
• Madrid – Barcelona AVE, Madrid Puerta de Atocha – Zaragoza Delicias – Lleida – Camp de Tarragona – Barcelona Sants.
• Madrid – Huesca AVE, Madrid Puerta de Atocha – Guadalajara Yebes – Calatayud – Zaragoza Delicias – Tardienta – Huesca.
• Madrid – Valladolid AVE, Madrid Chamartín – Segovia Guiomar – Valladolid Campo Grande
• Madrid – Malaga AVE, Madrid Puerta de Atocha – Córdoba Central – Puente Genil Herrera – Antequera Santa Ana – Málaga María Zambrano.
• Madrid – Cuenca – Albacete AVE, Madrid Puerta de Atocha – Cuenca Fernando Zóbel – Albacete Los Llanos.
• Madrid – Alicante/Alacant AVE, Madrid Puerta de Atocha – Cuenca Fernando Zóbel – Albacete Los Llanos – Villena AV – Alicante/Alacant.
• Madrid – Valencia AVE, Madrid Puerta de Atocha – Cuenca Fernando Zóbel – Requena / Utiel – Valencia Joaquín Sorolla
• Málaga – Barcelona AVE, Málaga María Zambrano – Antequera Santa Ana – Puente Genil Herrera – Córdoba Central – Zaragoza Delicias – Camp de Tarragona – Barcelona Sants.
• Barcelona – Sevilla AVE, Barcelona Sants – Camp Tarragona – Lleida – Zaragoza Delicias – Ciudad Real Central – Puertollano – Córdoba Central – Sevilla Santa Justa.
• Valencia – Seville AVE, Valencia Joaquín Sorolla – Cuenca Fernando Zobel – Ciudad Real Central – Puertollano – Córdoba Central – Sevilla Santa Justa.

From where in France can you come to Spain with the AVE?

Renfe and SNCF in partnership take you from 15 French cities to Spain.

Use the AVE to discover:

• Madrid – Barcelona – Marseille
• Barcelona – Paris
• Barcelona – Lyon
• Barcelona – Toulouse
• And many other smaller cities like Carcassonne, Lyon, Marsella, Nimes, París, Toulouse, Narbonne, Béziers, Agde, Sète, Montpellier, Avignon, Aix-en-Provence, Valence.

The good network of communication is one of the advantages of Spain: Train network, Road network and of course many airports. Have a look at our paper we wrote on the 10+ advantages why you should invest in Spain.

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Do you want to book a fast train ticket from Europe?
Do you want to book an AVE, fast train, ticket in Spain? Check the Renfe website.
More on the 25 years of the AVE?

Picture source: Renfe

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Madrid is the third most attractive city in Europe, the Middle East and Africa (EMEA) to invest in real estate.

At least this is clear from the survey “Global Investors Intentions 2017” conducted among 2,000 international investors by CBRE, the first international consulting and real estate services company.

According to Paloma Relinque, Director of Investment CBRE Spain Madrid is an attractive city for international investors because of several factors:

• Prices are still below that of other markets
• in recent years interesting rehabilitation and development projects have begun
• forecast of income growth

According to the study, London leads the list of the most attractive cities to invest in real estate, chosen by 17% of investors, followed by Berlin (15.8%) and Madrid (8.4%). They complete the top five posts Amsterdam and Paris.

To have an access to the report, register here or you can check the official press release in Spanish here.