Life by the sea: how to move to Spain for permanent residence

Earning money on square metres is turning from a dream into a reality for many who own Spanish property. The country has long ago turned from a resort area into an investment magnet. Income from renting out housing in Spain steadily attracts both private owners and professional investors. And the point here is not in the “beautiful sunset over Barcelona”, but in the projected yield, real figures and growing demand.

Heated market and profit formula

The mechanism is simple: buy – rent – profit. But in the Spanish climate this algorithm works more efficiently. In 2024, the average yield from rental property in Spain ranged from 4% to 7% per annum. In some areas of Valencia and Alicante indicators rose to 10%, especially with a competent strategy of short-term rentals.

On the Costa del Sol, a one-bedroom flat of 40-50 m² brought about €1,000 per month in summer and about €600-700 in winter. Rental income in Spain increases dramatically during the tourist season. Especially in a high-traffic area – near the beach or the historic centre.

Short-term rentals: money for daily rent

Airbnb is not just a platform, but a full-fledged business model. Flat owners in Málaga and Seville get up to €120-150 per day for a small studio in season. At 80% occupancy rate, the profit easily covers the mortgage, taxes and expenses.

Income from rental housing in Spain in this segment is maximally sensitive to management. Timely cleaning, high quality photos, competent description of the object – everything affects the positioning in the search and the price per night. Here, every metre works to exhaustion, and every review brings you closer to full occupancy.

Long-term leases: stability over the distance

Not everyone is looking for sunshine for a week – many move permanently. In Barcelona, the average price for a one-bedroom flat in 2024 was €1,100-1,400 per month. In Madrid, it was around €1,300.

The advantage of the format is predictability: the accommodation is rented for at least 12 months, payments are regular and the tax base is clear. Income in the long-term format is lower than in the short-term format, but it is more sustainable and requires less involvement.

How much does a flat or house bring in

One property – dozens of scenarios. In Alicante, buying a flat for €130,000 and renting it out at €850 per month provides a 7.8% annual pre-tax yield. In Tarragona, a €280,000 house rented out for €1,900 per month generates around 8.1%, assuming 100% occupancy and minimal management costs.

Costs that eat into profits

The income from rental property in the country decreases noticeably after deducting all mandatory expenses. In order to correctly estimate the profit, it is important to take into account not only taxes, but also the regular costs of management, repairs and insurance.

The structure of expenses is standard:

1. Taxes: on rental income – 19% for EU residents, higher for others.
2. Management: professional management companies charge 10-20% of the rent.
3. Insurance: €150 to €500 per year depending on coverage.
4. Repairs and depreciation: about 5% per annum of the value of the property.
5. Utilities: usually paid by the tenant, but in some cases by the owner.

A general “cross-section” shows that real rental income in Spain represents 70-75 per cent of gross profit.

How to rent a property in Spain legally and without problems

The law is not an obstacle, but a filter of efficiency. A tourist licence is required for short-term rentals in most regions. It takes from 2 to 6 months to obtain the licence, and without it, renting out accommodation is a direct route to a fine of up to €30,000.

For long-term rentals, everything is simpler – a rental agreement, registration with the tax office and recording the income in the declaration. Profitability depends directly on legal transparency. Regular reporting and registration of the property strengthens the owner’s position.

Who rents and how to choose a format

The target audience shapes the revenue model. In the short-term segment, demand is created by tourists, digital nomads, and participants in international events. They are interested in comfort, location and flexibility. The long-term market is formed by locals, foreign specialists, students and pensioners moving to the country for permanent residence.

Rental income varies depending on this audience. The short-term format brings more but requires constant management, while the long-term format is stable but less flexible.

Seven solutions for growing rental income in Spain

To increase rental income, owners implement strategically calibrated actions based on real market practices. Each of them directly affects the financial result, minimises losses and enhances the attractiveness of the property:

1. Tax optimisation – using the EU tax resident status reduces the income tax rate.
2. Obtaining a tourist licence – expands opportunities to rent accommodation, especially in popular regions.
3. Professional management – increases occupancy, minimises downtime, improves service.
4. Interior and equipment improvements – modern appliances and design increase the cost by 10-20%.
5. Seasonality analysis – adjusting prices and promotions during periods of demand.
6. Choosing a location with growing interest – for example, Almeria or Murcia is now cheaper but more promising.
7. Managing the reputation of the property – positive reviews increase the chances of a booking.

The complex of these solutions allows you to increase profits without large-scale investments. Proper strategy ensures sustainable income even in fluctuating economic conditions.

Entry price and real prospects

Investments start at €80,000-100,000 in small towns or €120,000-150,000 in resort areas. With the right model, the income provides a return on investment in 10-12 years. Objects with higher returns pay off in 6-8 years.

Given the growth in house prices (+5.3% per year on average according to Idealista), this strategy not only brings current earnings but also capital growth. A combined approach – rental plus long-term retention – allows building a stable income stream.

Rental income in Spain: conclusions

Income from rental housing in Spain depends not on luck, but on the accuracy of calculations and competent management. Short-term rental housing with good management, brings up to 10% per annum, long-term – stable 4-7%. Real estate allows you to adapt the strategy to the goals of the investor. When controlling costs, competent registration and the right choice of object, the profit remains stable even in conditions of market fluctuations.

Madrid, where history and culture harmoniously combine with the modern rhythm of life, is an attractive place to invest in property. Acquiring housing in the capital of Spain is not only an opportunity to acquire a high-quality asset, but also a promising investment.

Our guide provides detailed information on how to buy property in Madrid, including step-by-step instructions, useful tips and financial considerations to ensure a safe and profitable transaction.

Why you should consider buying a property in Madrid

Property in Madrid attracts investors and buyers from all over the world due to its economic stability, high standards of living and wide range of properties. But what makes 2024 a particularly attractive year to buy a home in this city?

Economic prospects of the capital

Madrid’s economy is growing steadily at an average rate of 3-4% annually. The city is actively developing thanks to the attraction of foreign investment, business development and increased tourist flow. The property market demonstrates stability even during global crises.

Investments in residential property look particularly attractive. The average rental yield is 4-5% per year. For example, a flat worth €300,000 can bring up to €15,000 annual income. The development of infrastructure and transport makes buying property in Madrid a profitable long-term investment.

High standard of living and developed infrastructure

Madrid offers a high quality of life thanks to its well-developed infrastructure, many parks and cultural facilities. The best schools and universities are located in the city, which makes it attractive for families with children. A convenient public transport system, including metro and buses, makes it easy to get to any part of the city.

Buying housing in the capital gives you the opportunity to enjoy life in one of the safest and most comfortable cities in Europe. This is especially important for those who plan to buy a home in Madrid for permanent residence. The city combines ancient streets and modern neighbourhoods, which allows you to choose housing for every taste and budget.

Pros and cons of buying property in Madrid

The property market in Madrid has its advantages and disadvantages. All aspects of the buying process must be considered in order to make an informed decision.

Benefits:

1. A stable market. House prices in Madrid are showing steady growth. Even in times of global crises, property values remain stable.
2. High rental yields. Average rental yields of 4-5% per annum for residential properties and up to 7% for commercial properties.
3. Obtaining a residence permit. If you buy a property worth €500,000 or more, you can get a residence permit in Spain for the whole family.
4. Diversity of Objects. In Madrid, you can choose from inexpensive secondary housing to luxury apartments in prestigious neighbourhoods.
5. Quality infrastructure. Convenient transport, schools, shops, medical facilities and entertainment centres provide a high standard of living.

Disadvantages:

1. High taxes. When buying property in Madrid, you have to pay taxes, which can reach 10% of the value of the property.
2. Mortgage difficulties. Foreigners are required to provide an extensive package of documents and make a down payment of 30% of the cost of housing.
3. Bureaucratic procedures. The registration process can take up to several months due to the need to obtain various permits and certificates.
4. Market Competition. Popular neighbourhoods sell out quickly, requiring quick decisions and constant market monitoring.

Despite these complexities, understanding all the steps of how to buy property in Madrid will help you avoid unpleasant surprises and make a profitable investment.

How to choose a neighbourhood to buy a property in Madrid

For a successful transaction, it is important to consider the purpose of the purchase: investment, residential or rental.

The best neighbourhoods to live and invest in:

1. Salamanca. Prestigious neighbourhood with luxury flats, boutiques and restaurants. The average cost of housing is €5,500 per square metre. Suitable for those looking for a premium property.
2. Chambers. Ideal for families. There are plenty of parks, schools and medical facilities. Housing costs around €4,000 per square metre.
3. Retiro, famous for its famous Retiro Park. Excellent infrastructure and transport accessibility. Suitable for comfortable living.
4. Lavapiés. A culturally diverse neighbourhood with a bohemian atmosphere. Property here costs around €3,500 per square metre. An excellent choice for young professionals and creative people.

Where to buy a flat in Madrid cheaply

For those looking for budget-friendly options, the following neighbourhoods are suitable:

1. Vallecas. The cost per square metre starts from €2,500. The area is actively developing and offers good prospects for price growth.
2. Karabanchel. One of the most affordable areas, where housing can be purchased at prices starting from €2,800 per square metre.
3. Leganés. A suburb of Madrid with convenient transport links. Property here costs around €2,600 per square metre.

Taxes and costs of buying a property in Madrid

Buying a property in Madrid involves various taxes and additional costs. Knowing all the fees helps you to budget accurately and avoid unexpected expenses.

Major property taxes:

1. Property Transfer Tax (ITP): When buying a secondary property, property transfer tax must be paid. The rate varies from 6% to 10%, depending on the region and the value of the property. For example, if you buy a flat for €300,000, the tax will be around €24,000.
2. Value Added Tax (IVA): VAT (IVA) of 10 per cent applies to new-build properties. If you buy a flat for €400,000, the tax will be €40,000.
3. Stamp Duty (AJD): is payable on the purchase of new-build homes and ranges from 0.5% to 1.5% of the value of the home.

Additional Costs:

1. Notary services: the notary draws up all legal documents and registers the transaction. The service costs between €500 and €1,500, depending on the complexity of the transaction.
2. Legal support: it is recommended to use the services of a lawyer to ensure the safety of the transaction. The average cost of legal support is around €1,500-2,000.
3. Real estate agent commission: agency fees are usually 2-3% of the property value. For example, if you buy a flat for €350,000, the agent’s commission would be €7,000-10,500.
4. Property valuation: the bank requires a valuation of the property in order to grant a mortgage. The cost of the service is €300-500.

How to buy property in Madrid: conclusions

Buying property in Madrid is an investment that offers great opportunities for life and business. The Spanish capital offers a variety of properties, a stable market and a high quality of life. To understand how to buy property in Madrid, you need to follow a clear plan of action:

1. Research the market and choose the right neighbourhood.
2. Prepare the necessary documents for mortgage processing.
3. Take into account all taxes and additional costs.
4. Engage experienced professionals to support the transaction.