Over the past few years, Madrid has proven to be one of the most solid cities in Europe for high and secure returns through luxury property rental. This is mainly due to the great depth of demand, liquidity and a rental market that has not stood still despite macro uncertainty. This is why, if you are currently evaluating investment strategies in apartments in Madrid, the rental model presents you with a realistic alternative. Find out below how to calculate yield returns, what regulates the city in 2025 and what levers raise ROI.
Why does Madrid concentrate capital (and why does it matter)?
- Liquidity and depth: Madrid gathers national and international demand, with traction in professional and graduate profiles. The capital maintains a “floor” of demand that stabilizes occupancy.
- Signs of profitability: the portals point to a gross profitability of housing in Spain of around 6-7% (national average, with dispersion by city and type) and differentials by municipalities in the region; in areas of the metropolitan south (Fuenlabrada, Getafe) peaks have been observed >8% (source: idealista) in 2024 due to rental tension, although with a risk profile different from the central prime.
- Clearer rules in tourism: Madrid is reordering the tourist use (RESIDE Plan) to separate regular housing from tourist apartments in the center; the objective is concentration by buildings and more housing for residents. This reduces uncertainty and rewards well-done residential rentals. Journal of the Madrid City Council.
This is why Madrid combines demand base + regulatory framework that pushes residential and medium term rentals. Ideal for tourists or travelers (national and international) for medium and long periods looking to live in top areas of the city and experience the city as authentic Madrileños, with its parks, restaurants, cafes, boutiques, museums and everything else.
Which rental model to choose: long stay, medium stay, and what NOT to do.
Choosing the right rental model is as important as choosing the apartment itself. Not all formats generate the same type of income, nor do they respond in the same way to regulation or market demand. And in Madrid this is a turning point: traditional rentals continue to be the stable base, but mid-stay has gained strength, as mentioned above, with the arrival of executives, international students and digital nomads looking for flexible contracts. In parallel, the tourism and investment model is facing more and more limits (elimination of the Golden Visa) and taxation. Therefore, before buying, it is advisable to define precisely to whom you are going to rent, how long you plan to keep the asset and what degree of management you are willing to assume. This decision will determine the real profitability (and peace of mind) of your investment.
Long stay (12+ months).
- Pros: low turnover, predictable income, fits solvent profiles.
- Cons: Rents are somewhat lower than in the season.
Medium stay (1-11 months).
- Pros: higher monthly ticket, focus on executives, masters, displaced.
- Cons: requires furnished and well-equipped housing, a little more turnover (and management).
Tourist (days/weeks).
- Panorama 2025 – 2026: Madrid pushes RESIDE Plan to avoid mixing tourist housing with residential in the center; Spain has ordered the removal of tens of thousands of unlicensed ads. Source: Diario de Madrid.
3) How to earn money with a rented apartment: practical example.
One of the most common mistakes is to calculate only gross profitability (annual income / purchase price). Useful for comparison, but incomplete. What really matters is the net return on CAPEX, i.e. how much you earn after all the expenses associated with putting your apartment into production.
- Actual CAPEX = Purchase price + taxes / gestoría / notary + renovation + furnishing + fees (if applicable).
- Net income = Annual rent – (vacancy + community + insurance + IBI + maintenance + management).
- Net / CAPEX × 100 = net profitability.
To update rents in current contracts, remember the official indexes (CPI/IRAV) and the limits of the Law on the Right to Housing, which vary according to the autonomous community.
Example:
Suppose you buy an apartment in Chamberí for 1.000.000 €.
- Refurbished and furnished: 100.000 €.
- Acquisition costs (taxes, notary, registration, agency): €80,000. Total CAPEX: €1,180,000.
If you rent the apartment for 3,800 €/month, your gross income would be 45,600 €/year.
Now let’s subtract the usual expenses:
- Community, insurance, maintenance and management: 8,000 €.
- Vacancy and other contingencies: €4,000.
👉 Net annual income: €33,600.
- Gross profitability: (45,600 / 1,000,000) × 100 = 4.56 %.
- Real net return: (33,600 / 1,180,000) × 100 = 2.84 %.
Added to this is the average annual revaluation of the asset (historically between 3% and 5% in prime areas such as Chamberí or Salamanca), which would raise the total return to between 6% and 7% per annum if you hold the asset in the medium term.
The margin between what you think you earn and what you actually earn can be large. In a mature market like Madrid, the key is not just to buy well, but to professionally manage vacancy, taxation and operating expenses.
Regulation and compliance: the essentials you need to know before investing in apartments in Madrid
- RESIDE Plan (Madrid): bets on separating uses and concentrating tourism in complete buildings; if you are thinking of residential rental / medium stay, you are aligned with the municipal trend. Madrid City Council Journal
- VUD / Unified Registry 2025: Mandatory ID for tourist rentals; without it, platforms can remove ads.
- Community of Madrid – VUT: minimum requirements, RC insurance, habitability conditions, etc. (if applicable).
Being aware of the above and complying avoids penalties and protects your IRR. The residential/temporary route is the cleanest today.
Where to buy (and with what expectations)
Prime and consolidated zones offer stability, a high ticket and lower risk premium:
- Salamanca (Recoletos, Goya, Castellana, Lista): luxury, solvent demand, low rotation.
- Chamberí (Almagro, Trafalgar): stately architecture, professional profile, very high absorption.
- Retiro (Jerónimos, Ibiza): park, neighborhood life, family/executive tenant.
Neighborhoods in transformation (more profitability, more management):
- Puerta del Angel / South Metropolitan: higher yield spurts, but requires micro analysis (quality of property, community, future liquidity). High yields have been seen in peripheral municipalities in 2024, with a different risk structure. Source: Cadena SER.
Search tip: prioritize buildings with elevator, medium/high heights, exterior and balcony; 1 to 3 bedrooms, ideally 2 bathrooms. This rents fast and well. The prime protects capital and vacancy; the emerging adds profitability points if you choose carefully.
An alternative for those who want to live Madrid like a real local: fractional co-ownership
If you are going to use the property for a few weeks a year and do not want to tie up all the capital and do not want to manage the property management, the option of fractional apartments allows you to buy from 1/8 in prime assets, with planned weeks, governance between partners and 360° operation (in Nolab, managed by Noulivin). IMPORTANT: this is not a timeshare and does not depend on the daily tourist market. It is a thesis where you get lifestyle + value preservation instead of monthly rent. Also useful as a gateway to the market prior to a full purchase.
If your goal is to enjoy Madrid and at the same time make a profit on your investment, fractional is a very efficient way to Madrid.
Express checklist before investing in apartments for rent in Madrid
Investing in housing for rent in Madrid can be a very solid strategy, as long as the decision is based on data and not on hunches. The market rewards planning and punishes improvisation. Before closing a deal, be sure to review these key points:
- Rental model and target audience Define whether your apartment will work better in long stay (12+ months) with lower turnover and stable flows or in medium stay (1-11 months), increasingly demanded by executives and international students. Each format has different tax burden, vacancy and management level, so the model must be defined from the beginning.
- Calculation of the complete CAPEX As we have already explained, it is not enough to add price and notary fees. Include
taxes, renovation, furnishing and possible management fees to obtain the real cost of the project. Gross yields that omit these items can distort the final yield by up to 30%. - In Madrid, technical inspections (ITE/IEE) are mandatory and determine the risk of spills or structural repairs. It is also advisable to review the community statutes and the limits to the rent approved in assembly.
- Regulation and compliance 2025 The new RESIDE Plan delimits tourist use zones and reinforces controls on licenses. If your goal is legal and fiscal stability, focus your investment on pure residential uses, with updated documentation and certifications.
- Operational management and actual costs Management is the point that most determines whether the investment works or becomes a burden. Properties without professional management lose between 0.8 % and 1.2 % of annual profitability due to turnover, vacancy and poor maintenance. In the case of professionally managed properties, annual fees are typically around 3% of gross income; however, several operators – including Nolab through its Noulivin vertical – offer 100% bonuses in the first year, allowing the asset to be stabilized with no initial management cost.
- Exit plan and investment horizon Even if renting is the main objective, it is advisable to project the appreciation potential and sales terms in the neighborhood. Madrid maintains an average appreciation of 3-5% per year in prime areas (Salamanca, Chamberí, Retiro), a factor that reinforces overall profitability if combined with well-managed rental income.
In conclusion, if you are looking for an apartment in Madrid to rent, or a fractional entry in prime areas, with numbers that really make sense, contact us, an advisor is waiting for you to provide you with options, demand analysis by neighborhood and a proven net financial model for you to make a decision with data.
Frequently Asked Questions
As a market reference, gross profitability usually ranges between 3% and 5% depending on the neighborhood and type of property. The net yield depends on the real CAPEX (purchase, taxes, refurbishment, furnishing, management) and vacancy. Prime areas such as Salamanca, Chamberí or Retiro prioritize stability and capital gains; emerging areas can offer higher figures with more management.
Long stay (12+ months) offers low turnover and predictable flows; medium stay (1-11 months) tends to raise the monthly ticket with executive and graduate student profiles. In 2025, both formats are the most sustainable at a regulatory and operational level in Madrid.
For consolidated locations, many investors start with €300-400 thousand of equity and finance the rest (up to 70-80% depending on the profile). The key is to budget the full CAPEX (not just price) and project conservative vacancy and expense scenarios.
It includes: taxes, notary/registry/management, renovation, furnishing, community, insurance, IBI, maintenance, vacant periods and, if applicable, professional management. With all that you get the net profitability, which is what rules when deciding.
Yes, professional management reduces vacancy, standardizes processes and takes care of the asset. Industry
