Snezhana Reznikova, a real estate expert from Madrid, explains how to profitably invest in real estate for renting to students.
Like in any world’s capital the real estate market in Madrid varies a lot. There are central districts that are always interesting for tourists. COVID-19 has screwed up tourism industry and such popular platforms as AIRBNB, Homeaway, Spotahome, Interhome are surviving. But let’s hope everything is about to get good very soon.
There are districts in Madrid known as bedroom communities with options for young professionals, for young couples , for families with kids and finally for students. Why am I listing all the options? Because wise property purchase depends on the target audience. If you want to invest in property and lease it to students – that will be a certain target group. Tourists will be a quite different target audience.
Let’s consider university students as our target group for rent
Why is it so attractive right now? Solvency (parents always pay) and permanence (in Spain there is no distant learning, thanks God!)
Monkloa and Chamberi are known for students dormitories. Students prefer renting the apartments there. For such clients the investors move 3-4 rooms apartments into a kind of dormitory. Is it possible to buy shabby apartments in Madrid and get high profitability after renovation? Yes, unfortunately, especially now.
WHY unfortunately? It’s embarrassing to be glad, when the average prices for property dropped 3-5% in the past year. Many people mostly old ones died of COVID-19.
But in this very sector heirs want to get rid of unnecesssary property as quick as it is possible. Here one can find the real treasure and even agree on a better price. In this case redecoration, FRIENDS style interior, 2 bathrooms instead of original one can give you regular customers and excellent profitability.
Let’s look at an example of real estate investment in Madrid
Example: invest in real estate in Madrid profitably
The purchase of 4-room shabby one bathroom apartments in Chamberi – 340 000 EURO (10% lower than the market price).
34 000 EURO the cost of purchasing (taxes and notary expenses).
Renovations – 50 000 EURO. We remove the kitchen to create American like open space combining kitchen, dinning area and family room. We build one more bathroom and one more bedroom. So, we have 5 rooms to rent instead of 4.
Well-designed apartments for students is very rare to find. One can lease the apartments very quickly for 2 400 for the group of 5 friends.
Maintenance costs 240 EURO a month, taxes 3100 EURO a year.
Income after paying taxes = 2 070 EURO. Profitability in gross 6,79%, ROI 5.38%, PER (price/ profitability 14,73 years)
What else is good about this purchase? The property will rise 10% at least after COVID-19 pandemic. So, the purchase 10% cheaper and selling 10% more expensive also has its own charms.