Where Is It Most Profitable to Buy to Rent in Spain? Secrets
August 18, 2025
Buying a property with the purpose of renting it out is becoming increasingly popular. The search for profitability in the real estate market has led investors to explore different regions of the country in search of opportunities that maximize long-term returns. In this context, the key question arises: where is it most profitable to buy to rent in Spain? Analyzing this dynamic involves not only examining prices and demand, but also economic trends and the specific characteristics of each region. Here, we tell you everything you need to know below.
What does buy-to-let mean?
Buy-to-let is an investment strategy that consists of acquiring a property with the intention of renting it out to earn profitable passive income. This strategy can be very profitable, but it also involves certain risks, such as the possibility of tenants failing to pay rent or the property suffering damage. To carry it out successfully, factors such as the following must be considered:
Location is one of the most important factors to consider when purchasing a property.
The purchase price must be appropriate for the investment to be profitable. It is essential to conduct a market study to understand rental prices for similar properties in the area.
The property must be attractive to tenants, in addition to being well located, of an appropriate size, and in good condition.
This type of investment is very popular and widely chosen because it provides benefits such as:
Obtaining Passive Income
The main advantage of buying property to rent is the generation of passive income. This means that once the property is rented, you, as the owner, receive monthly income without the need to actively work.
Housing Appreciation Potential
Housing is an asset that tends to appreciate over time. In addition to rental income, capital gains can also be realized at the time of sale.
Tax Deduction
In some cases, rental income benefits from tax deductions, reducing overall costs and increasing net profitability.
Current Overview of the Spanish Real Estate Market
The real estate market in Spain has experienced nearly continuous growth in recent years, driven by rising demand and limited supply. According to data from the National Statistics Institute (INE), housing prices in Spain increased by 8.2% in 2022, the highest annual rise since 2007. The average price reached €1,507 per m².
This growth has been particularly notable in major cities such as Madrid and Barcelona, where prices have exceeded €3,000 per square meter. In Madrid, the average home price reached €3,022 per m², representing an 8.6% increase year over year. In Barcelona, the average price stood at €3,252 per m², an 8.1% increase compared to the previous year.
However, this increase has contributed to reduced housing affordability for young people and low-income families. In Spain, the average home price is 11.3 times the average salary, indicating a high level of overvaluation. Currently, the factors having the greatest impact on demand are:
Spain’s population continues to grow. In 2023, the population reached 47.4 million inhabitants, representing an increase of 0.4% compared to the previous year.
Immigration is also contributing to increased housing demand. In 2023, an estimated 600,000 immigrants arrived in Spain.
Spain’s Most Profitable Cities for Real Estate Investment in 2024
According to data from several real estate portals, the most profitable cities in Spain to invest in during 2024 are:
Ourense, with an estimated return of 8.88%, is the most profitable city in Spain for residential real estate investment. This Galician city is an important university hub, which contributes to a young and growing population. In addition, it offers a solid employment market.
San Cristóbal de La Laguna, in Tenerife, ranks second in the ranking, with an estimated return of 8.15%. It is a tourist city thanks to its rich cultural and natural heritage.
Sanlúcar de Barrameda, in Cádiz, is the third most profitable city, with an estimated return of 7.72%. This coastal city is well known for its wine production, which also makes it a popular tourist destination, generating significant employment in the hospitality and gastronomy sectors.
Badalona, in Barcelona, ranks fourth with an estimated return of 7.68%. This Catalan city has an important industrial and commercial base, providing solid employment opportunities. In addition, its close connection to Barcelona attracts both residents and tourists.
Alcalá de Henares, in Madrid, completes the top five with an estimated return of 7.66%. It is a historic city with a strong cultural and educational presence and excellent connectivity.
Real Estate Trends 2024 by Region
Real estate trends for the year 2024, both in Spain and abroad. Real estate investment in Spain and in Europe, are being strongly marked by factors such as:
Geopolitical uncertainty and tighter financing conditions.
Investors are showing strong interest in segments that offer stable income and resilience during economic downturns. This includes niche segments and asset classes supported by major megatrends such as decarbonization, energy transition, new technologies, demographic changes, and urbanization.
Despite the economic challenges associated with decarbonization, such as rising construction costs, industry professionals recognize the added value of sustainability.
The trend of converting commercial spaces into residential housing will continue to grow. This phenomenon not only responds to residential demand, but also contributes to urban revitalization and the creation of more diverse communities.
In the specific context of Spain, we can say that:
Madrid is and will continue to be the most attractive city for real estate investors, with strong housing demand for both rental and purchase.
Barcelona will also continue to show a dynamic real estate market, driven by its relevance as a tourist and cultural center. In addition, increased investment in co-living developments is expected.
Valencia holds a strong position as both a tourist and commercial hub, which will contribute to high demand for commercial and office space.
The Basque Country is characterized by a stable real estate market, with strong housing demand and significant need for industrial and logistics space, driven by its importance as an industrial and technological hub. By 2024, this trend is expected to strengthen and continue growing.
Finally, in Andalusia, an increase in residential property investment is expected—especially in villas—where privacy, comfort, and proximity to green spaces and beaches are highly valued.
Recommendations for Real Estate Investment in Spain (2024)
As with any investment, it is important to remain cautious. No matter how promising or fast-growing a market may seem, it is essential to stay informed and not act impulsively. Remember that real estate investments involve significant capital. Our key recommendations are:
Conduct Market Research
Market research is the most critical step when investing in real estate. It is essential to understand rental demand in the area where you plan to invest. To do so, you can consult data from the National Statistics Institute (INE), real estate portals, or companies specializing in market research. You should also be familiar with current rental prices for similar properties in the area, either through real estate portals or real estate agencies.
Risks
Identify, classify, and always keep in mind the types of risks you may face when investing, for example:
Risk that the tenant may fail to pay the rent.
Property prices may decline, resulting in a loss of investment value.
Changes in regulations and rental laws can always affect the profitability of an investment.
Patience
Be patient—real estate investing is a long-term strategy. Patience is essential to generate returns.
Focus on cities with high demand
Cities with strong housing demand tend to deliver better returns.
Consider demographic trends: Cities with a young and growing population tend to offer better investment opportunities.
Invest in well-located properties
Well-located properties are easier to rent and sell.
Invest in quality properties
Quality properties tend to have a higher market value and do not require additional renovation costs to make them move-in ready.
Spanish Real Estate Market Outlook for 2024: What Can We Expect?
The outlook for the real estate market in Spain is uncertain: some analysts foresee growth, others stagnation, and others a slight decline.
However, most specialized real estate portals point to a slight market cooling, with a possible price decline of between 1% and 2%. Rising interest rates have made it more difficult to obtain financing for home purchases. In addition, the inflation experienced in recent years has reduced households’ purchasing power. On the other hand, there is also economic uncertainty driven by the war in Ukraine and the energy crisis. Even so, the market is expected to remain solid, with steady demand—especially in major cities such as Madrid and Barcelona.
According to a report by the consulting firm Knight Frank, housing prices in Spain could decline by 1.5% in 2024, while the firm Tinsa forecasts a price decrease of around 2%.
What Is a Good Net Return on a Rental Property?
Determining what constitutes a good net return on a rental property depends on several factors, including the local real estate market, the property’s location, the type of property, and overall economic conditions. Below are some general guidelines that can help you evaluate the net profitability of a rental investment.
Gross Return vs. Net Return
Rentabilidad Bruta: Es el porcentaje que se obtiene al dividir los ingresos anuales por alquiler entre el costo de adquisición de la propiedad.Rentabilidad Bruta=(Ingresos Anuales por AlquilerCosto de Adquisicioˊn)×100\text{Rentabilidad Bruta} = \left( \frac{\text{Ingresos Anuales por Alquiler}}{\text{Costo de Adquisición}} \right) \times 100Rentabilidad Bruta=(Costo de AdquisicioˊnIngresos Anuales por Alquiler)×100
Rentabilidad Neta: Es el porcentaje que se obtiene al considerar los ingresos anuales por alquiler menos todos los gastos anuales operativos (mantenimiento, impuestos, seguros, etc.), dividido entre el costo de adquisición de la propiedad.Rentabilidad Neta=(Ingresos Anuales por Alquiler−Gastos Anuales OperativosCosto de Adquisicioˊn)×100\text{Rentabilidad Neta} = \left( \frac{\text{Ingresos Anuales por Alquiler} - \text{Gastos Anuales Operativos}}{\text{Costo de Adquisición}} \right) \times 100Rentabilidad Neta=(Costo de AdquisicioˊnIngresos Anuales por Alquiler−Gastos Anuales Operativos)×100
Factors Influencing a Good Net Return
Property Location:
Urban and well-connected areas tend to have higher demand and may offer higher net returns.
Developing areas may offer opportunities for greater future returns.
Property Type:
Residential properties, such as apartments, tend to have different return profiles than commercial properties.
Smaller properties, such as studios or one-bedroom apartments, can generate proportionally higher returns due to lower acquisition costs.
Real Estate Market Conditions:
A booming rental market can increase rental income and improve profitability.
Rent control policies and vacancy rates also affect profitability.
Operating Expenses:
Regular maintenance and repairs can reduce net returns.
Local property taxes and insurance also affect operating costs.
Ideal Net Return
Generally Accepted: In many markets, a net return between 4% and 6% is considered good. This means that, after deducting all operating expenses, the property should generate between 4% and 6% of the acquisition cost annually.
High Return: Net returns above 6% are considered excellent, but they may also involve higher risk or more intensive management.
Low Return: Net returns below 4% may be acceptable in very stable and secure markets, where property value appreciation is high and risk is low.
Example of Net Return Calculation
Suppose you purchase a property for €200,000 and the annual rental income is €12,000. Annual operating expenses (taxes, maintenance, insurance, management) total €4,000.
Annual Rental Income: €12,000
Annual Operating Expenses: €4,000
Net Income: €12,000 − €4,000 = €8,000
Acquisition Cost: €200,000
Net Profitability=(8,000200,000)×100=4%{Net Profitability} = \left( \frac{8,000}{200,000} \right) \times 100 = 4% Net Profitability=(200,0008,000)×100=4%.
In this case, a net return of 4% would be considered reasonable in many markets.
Final Considerations
Comparative Analysis: Compare the net return with other investment options (such as stocks or bonds) to ensure you are achieving an attractive return.
Risk and Management: Consider the level of risk and the amount of management you are willing to assume. Properties that require more active management may offer higher returns but also involve more work.
Professional Advice: Consult a financial advisor or real estate investment expert to obtain a more accurate assessment tailored to your circumstances.
With these guidelines, you will be able to better evaluate the net return of a rental investment and make informed decisions about your real estate investment.
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Conclusion
In conclusion, rental real estate investment in Spain is undoubtedly attractive. While certain areas may offer higher rental returns, it is essential to consider economic stability, long-term growth projections, and sustained demand over time. The key lies in finding the right balance between profitability and investment security, while remaining flexible and adapting strategies to the specific characteristics of each region.
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