Real Estate Investors in Madrid

[Eyal Michaeli]

Hi guys!

I'm living and doing my research for the past 7 months for the Madrid market (and the area around it) - will be great do discuss with some members here and share our experience, toughs, etc.

It will also be great to discuss the current market situation and share the news - do you think it is still a good time to get into the market?

thanks!

Eyal

[Inigo A.]

A ton of opportunities in Madrid and the surrounding cities. Rents keep increasing at incredible rates.

One of the few profitable markets in Spain

[Erwin Groenendijk]

@Inigo A., could you give an example of this? We are mainly active in the Barcelona/Valencia and surrounding areas.

[Inigo A.]

Originally posted by @Erwin Groenendijk:

@Inigo A., could you give an example of this? We are mainly active in the Barcelona/Valencia and surrounding areas.

Hi Erwin! Smaller cities in the surrounding areas of Madrid, like Torrejon, Guadalajara, San sebastian de los reyes... etc always present some cash flowing option. The CoC return very likely won't be as amazing as those seen in the US due to the stringent lending requirements in Spain.

How's the business been going for you in Valencia so far? Do you focus on short term occupation?

[Erwin Groenendijk]

@Inigo A., curious to hear some numbers. Would that be a yearly bruto renting yield of 10% and CoC higher %?

In Valencia we have multiple flips that we are now finishing (a building and a garage that we are transforming into apartments). After we will focus completely on shorter term rentals with our capital in mainly Barcelona and some in Valencia.  

[Robert Downs]

Hey @Inigo A., I hope you are finding success in my home state of Minnesota.

Obviously govenment-backed loans make real estate operations more profitable in the US, but if no profits were possible in Spain the entire rental market would collapse. Also, the incredibly low interest rates and low yearly property taxes (depending on your location) help a bit on the cash flow end.

From my understanding, opportunities exist in different cities in Spain, especially when considering distressed properties outside of inflated metropolitan areas (not to mention the alternative ways of acquiring property like judicial auctions, cash purchases, etc.).

 

[Randall Re II]

How different is it investing in Spain from the states? What challenges do you face in Spain?

[Inigo A.]

Originally posted by @Robert Downs:

Hey @Inigo A., I hope you are finding success in my home state of Minnesota.

Obviously govenment-backed loans make real estate operations more profitable in the US, but if no profits were possible in Spain the entire rental market would collapse. Also, the incredibly low interest rates and low yearly property taxes (depending on your location) help a bit on the cash flow end.

From my understanding, opportunities exist in different cities in Spain, especially when considering distressed properties outside of inflated metropolitan areas (not to mention the alternative ways of acquiring property like judicial auctions, cash purchases, etc.).

 

Thanks for the comment Robert! I agree with that, I see a lot of flip opportunities inside the metro areas in Spain and interest rates are crazy low.
Additionally, Spain is one of the strongest turist destinations in the world and that rental market is there too.

[Inigo A.]

Originally posted by @Randall Re II:

How different is it investing in Spain from the states? What challenges do you face in Spain?

Hi Randal, one of the problems are the loans, when investing in Spain 20% DP is required at the very least.

2nd The majority of the Spanish houses are condos so they all carry HOA fees.

3rd Demand is an issue, Spain is losing population due to the crazy high unemployment rate, young people are getting out for better opportunities. People tend to stay in the city they were raised too. There is no real estate investing culture either.

I would like to be corrected if someone disagrees ;)

[Randall Re II]

Thank you Inigo. It's been a goal of mine to one day invest overseas in places just like Spain. I spent a few weeks in Spain and loved it. 

[Randall Re II]

Are there any companies in Spain that help with long-distance investment properties? 

[Mike Lambert]

@Randall Re II

Spain is a beautiful country indeed and I've been a big supporter of investing internationally here. However, one of the golden rules of investing "don't fall in love with your properties" could be enlarged to "don't fall in love with a location/country". the fact that you love a country doesn't make it a great location to invest in real estate, especially if you're an investor. Indeed, it's a numbers game, considering that you're not gonna live in the property.

Of course, if you want to buy a vacation home or a short-term rental that you can use for yourself, it's another story as it wouldn't be a pure investment. Or, you might want to move to Spain and you prefer to invest locally.

This being said, Spain actually does have interesting investment opportunities so you're in luck :-). I'd just make sure I invest for the right reasons.

[Erwin Groenendijk]

@Mike Lambert, 100% agree with you here. The numbers need to make sense.

@Randall Re II, what would be your strategy investing possibly in Spain? We are doing multiple flips here and can help you with everything you need to know

[Randall Re II]

Erwin,

Short term rental would be the path I'd like to go, with an open mind to flipping down the road. I know that once covid goes away in a year or two, the whole world will go on a huge traveling spree with Spain being a big destination. 

[Randall Re II]

Mike,

Thank you for the advice, and honestly, it would be for short-term rentals that I'd be able to use down the road so mostly investment, but some personnel use. I loved Spain when i visited there and there was no shortage of people visiting which provides an opportunity. 

[Erwin Groenendijk]

@Randall Re II will send a PM asking a few things more. 

[Nikki Stoddart]

Quote from @Erwin Groenendijk:

@Inigo A., curious to hear some numbers. Would that be a yearly bruto renting yield of 10% and CoC higher %?

In Valencia we have multiple flips that we are now finishing (a building and a garage that we are transforming into apartments). After we will focus completely on shorter term rentals with our capital in mainly Barcelona and some in Valencia.  

Hi Erwin! How are things going to STR in spain with the new regulations? Curious if there are still pockets that allow STR near Barcelona, or if you are looking at other areas.

[Erwin Groenendijk]

Hi Nikki, in general it is getting more difficult in areas where a lot of licenses have already been requested. Just last week, they announced that there will be a temporary stop in Valencia and the island of Mallorca. The same was announced for Madrid not so long ago and in Barcelona, it hasn't been possible anymore for a couple of years. In Barcelona it would only still be possible if you buy a property that already holds a license however you pay quite a lot more for them. 

That being said, there are still a lot of opportunities to get properties with tourist licenses. We are moving towards where it is still possible to obtain them (normally based on the density of licenses already given) and at the same time where it makes sense investment-wise (attractivity for tourists). 

We are for example now looking at the Costa Blanca below Valencia and Alicante as a city with an international airport. Also other places like Malaga would make sense. Many others are starting to analyse the north of Spain because of climate change.

[Naima Zodros]

Quote from @Erwin Groenendijk:

@Inigo A., curious to hear some numbers. Would that be a yearly bruto renting yield of 10% and CoC higher %?

In Valencia we have multiple flips that we are now finishing (a building and a garage that we are transforming into apartments). After we will focus completely on shorter term rentals with our capital in mainly Barcelona and some in Valencia.  

I’ve identified a fantastic market opportunity in mid-term student rentals in Alicante, Spain, with tenants typically staying 5-10 months per year. My property has been fully booked at higher rental rates. My first flip was a success, achieving a 14.5% return on invested capital. I'm now looking to replicate this success and welcome potential investors to reach out for further opportunities.

[Erwin Groenendijk]

Hi @Naima Zodros, congrats on the flip 👍. What are you estimating in terms of gross- and net yield on your student rental deal?

[Naima Zodros]

Quote from @Erwin Groenendijk:

Hi @Naima Zodros, congrats on the flip 👍. What are you estimating in terms of gross- and net yield on your student rental deal?

21.240: Gross with current contracts (585, 585 and 600 monthly) 
11.640: Net (estimated) I have not gone through a full year yet, and I estimate my costs at 800 monthly

would you like to DM me

[Erwin Groenendijk]

And what would that be in % compared with the purchase price/total costs of the project?

[Naima Zodros]

Quote from @Erwin Groenendijk:

And what would that be in % compared with the purchase price/total costs of the project?

Total cost was
103K hipoteca
44k downpayment and works + furnitures 

[Erwin Groenendijk]

So 147.000 total costs with 21.240 gross income would give you ~14,4% yield

And with 11.640 net income ~7,91% yield.

That is a good deal and worth to be repeating