A home will always be a basic need, and the increasing demand for real estate is not going to slow down anytime soon. Investment real estate is one of the most popular forms of investment and is considered “concrete gold” by investors. Long-term returns can be achieved thanks to regular rental income and an increase in the value of the property.

1. Location: Top addresses bring high rental income and attractive returns

In recent years, strong population growth and the continued influx of people into major metropolitan areas have led to a significant increase in demand for residential real estate in these areas, which in turn has resulted in an upward trend in prices for rental and purchase properties. Places such as Les Corts and Ciutat Vella in Barcelona, the coast of Málaga and Seville have seen an increase in property prices.

Those who own residential property in these areas have so far been able to rent it out at very good rents and at the same time benefit from a low vacancy rate and low risk.

Although the Corona pandemic may lead to a short-term shift in real estate purchases by investors, it will not lead to a long-term decline in demand for housing. In 2019, investors in Spanish territory achieved a return of 7.4% on their properties (data from the Bank of Spain).

2. Financing: Using rental income to cover running costs and build reserves

When purchasing an investment property, it is important to ensure that buyers can cover around 20% of the purchase price and ancillary acquisition costs with their own assets. In addition, investors should make sure that the ongoing rental income not only covers the mortgage, but also generates a surplus. With this additional income, owners can build up financial reserves to cover ongoing management fees or maintenance costs.

3. Type of property: Microapartments are an investment favorite

Micro Apartments are partially or fully furnished one-bedroom apartments in residential complexes with a minimum rental period of six to nine months. The demand for this type of property is due to the growing number of single households, which account for about half of all household types in the main Spanish cities. The relatively low entry prices for micro apartments make them a comparatively low-risk and profitable investment with attractive ROI prospects.

4. Resale: Value can be added with modernisation work

Investors are advised to set aside about one euro per square meter of living space per month as a maintenance fund for their investment property. Before purchasing, investors should be sure to visit the property to assess its condition, whether it is an existing property or a new construction. External factors such as location, infrastructure or standard land value cannot be directly influenced here.