What return can I expect from my Madrid real estate investment?
This article presents average returns on Madrid real estate investment and compares them with the returns we have achieved for our clients over the years. Moving2Madrid clients typically earn returns 50-100% above average. Keep reading to find out why, and how we can help you achieve similar returns.
The good news: You have worked hard and accumulated savings that you are free to invest as you wish- Congratulations!
The potentially bad news: Your hard-earned funds are parked in a low-interest account that barely earns enough to compensate for inflation. This is important to take into consideration. For example, if you are only earning a 1% return on your money, but prices are rising by 2% every year, you have lost purchasing power by keeping your money in the bank instead of spending it. Depending on where you live, the inflation effect could mean that your bank account is earning a return as little as 1%, or even a negative return, when you adjust it for inflation.
The potentially ugly news: Your funds are currently sitting in a bank account and not earning any interest at all.
Your solution: You decide to put your money to work. Real estate investment seems relatively safe while simultaneously yielding an attractive return. Furthermore, property investment could prove useful for your family visits to Madrid!
The deciding factor: What kind of return on a Madrid real estate investment can you realistically expect to achieve?
Madrid offers some of the best real estate investment opportunities
The average gross return on Madrid real estate investment is roughly 4-4.5% of the property price. After accounting for both fixed and variable costs, this usually filters down to a 3-3.5% return equivalent on your long-term rental property investment.
Moving2Madrid clients typically earn returns 50-100% above average. To put this in perspective, we are able to obtain an average pre-cost return of 9-14% for our clients. After accounting for all costs, our managed properties average a post-cost, pre-tax return equivalent to 5,5-8%, after a first transition period and when we optimize the purchase for investment. With capital appreciation, and the fact that we purchase undervalued properties, we obtain the equivalent of a 6-8% net return for our portfolio (See examples below).
Do you want to achieve these above market returns on your Madrid real estate investment? If so, you need a 360º view and an expert approach to make sure you get the most out of your property investment. We here at Moving2Madrid know how to find undervalued properties, renovate them to obtain high-margin rental clients and manage the properties efficiently and effectively. Contact us today to get started!
Return is not just about rental yields
Return is also about the potential for capital appreciation. If you purchase a property in Madrid’s city center, current reports have that prices increased 19% from 2016 to 2021. Not many cities can come close to this, particularly those that, like Madrid, have relatively low entry costs.
In fact, it’s in the “sweet spot” for property investment. The entry price is extremely cheap, and average returns on Madrid property investment are some of the best in Europe- particularly among leading capital cities. Prices are forecast to further appreciate in coming years as the Spanish economy continues to expand. This will be enhanced by the lack of housing capacity in central Madrid.
The Moving2Madrid real estate investment advantage
If you let us help you, we can improve upon this. We know how to:
- Refurbish an undervalued property so that its value increases beyond your initial investment and variable costs.
- Create a strategy to help you achieve a targeted return in a given time frame.
- Time your investment advantageously.
- Invest in the neighborhoods with the highest margins for improvement. These are currently Lavapiés, Malasaña and Sol. Areas like Chueca, Huertas, and Palacio are more stable.
We have the track record, process and team to achieve net returns 50-100% above market averages.
We continually update our website with the most recent information available about real estate investment in Madrid. We detail costs, the best neighborhoods, how to optimize taxes and more. Keep checking back! If you need help understanding how a Madrid real estate investment can make your valued savings work harder, and better, don’t hesitate to contact us or request a consultation.