I'm looking at studios of 35-40 square meters in areas like Chamberí or Malasaña, they're going for around 250-280k. I've seen them renting for 800-900 euros a month, but with community fees, taxes and maintenance I'm wondering if it actually works out profitable. Anyone who's invested in something similar, mind sharing your experience?
Don't just look at the gross rental yield, because you're going to be disappointed. I know a colleague who bought something similar in Malasaña a few years ago, paid 260k and between building fees (120 euros/month), property tax, maintenance and tenant insurance easily came to 250-300 euros a month, plus unexpected stuff like leaks or pipe replacements that popped up out of nowhere. With 850 euros in monthly rent he was left with just over 500 in actual money after expenses, which is a return of 2-2.5% a year if there weren't months without tenants or payment issues.
What does make sense is if you see the flat as a bet on the area appreciating long-term (10+ years) and not as a source of cash flow, or if you have the money to ride out dead periods without it killing your cash. Otherwise, that down payment gives you more room with index funds or even other types of real estate investment with a better ratio.
I'm not gonna lie, those numbers don't add up at all 🤔 You're talking about 250-280k for a property that generates you at most 10-11k a year gross, and that's not even counting community fees (probably 80-100 euros/month in those areas), property tax, insurance, and the reality that there's always a month or two with no tenant. In the end your gross yield drops to less than 3-3.5% annual, and honestly, with how the rental market is in Madrid right now, that capital would give you more peace of mind sitting in funds or pretty much anything else. If what you're after is long-term assets that's fine, but as a pure investment to live off the rent, I wouldn't go for it in those areas at those prices.
Adding to what's been mentioned above, the numbers really don't work out for investing with that margin. That said, there's one detail most people don't bring up: that 250-280k really depends on the property's condition and whether it needs renovation. If you find something that needs fixes for less money, or if the area is changing and rents go up over the next few years, things shift. But the way it stands now, with that gross yield of 3-4% annually, you have to be pretty confident the resale price will climb significantly, because your monthly cash flow is basically nothing after expenses.
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