Rental Yield in Madrid in 2026: By Neighbourhood and Property Type

Buying property in Madrid to rent out is a common choice among international buyers who combine personal use with investment. But rental returns are not uniform: they vary significantly by neighbourhood, property type, and tenant profile. Understanding these figures before purchasing is the difference between an investment that works and one that disappoints.

How rental yield is calculated

Two metrics are commonly used:

Gross yield: (annual rent / purchase price) × 100. The simplest calculation and the most commonly cited in market comparisons.

Net yield: ((annual rent – annual costs) / (purchase price + acquisition costs)) × 100. This is the relevant figure for deciding whether the investment makes financial sense.

Annual costs that reduce gross yield:

• IBI (property tax): €200–800/year depending on the cadastral value
• Community fees: €50–300/month depending on the building
• Insurance (home and rental): €300–600/year
• Vacancy (time without a tenant): typically 5–10%
• Maintenance and repairs: 0.5–1% of the property value per year
• Property management (if using an agent): 10–15% of annual rent
• Income tax on rental income (IRPF or IRNR): 19–47% depending on your profile

A gross yield of 5% typically translates to a net yield of 3–3.5% after all these costs. Keep this in mind when comparing Madrid returns to other markets.

Gross yield by zone in Madrid (2026)

Data reflects the relationship between purchase prices and market rents in each area as of mid-2026.

Prime zones (lowest yield, highest security)

| Neighbourhood | Average price €/m² | Average rent €/m²/month | Gross yield | |---|---|---|---| | Salamanca | €8,500–10,000 | €22–28 | 3.0–3.5% | | Jerónimos / Retiro | €7,500–9,500 | €20–25 | 3.0–3.5% | | Almagro / Chamberí | €6,500–8,000 | €18–24 | 3.2–3.8% | | Justicia / Chueca | €6,000–7,500 | €18–22 | 3.5–3.8% |

In these areas, the appeal is not current yield but long-term capital appreciation and liquidity: these are the easiest assets to sell or let at any time.

Secondary premium zones (yield–security balance)

| Neighbourhood | Average price €/m² | Average rent €/m²/month | Gross yield | |---|---|---|---| | Chamartín / Prosperidad | €4,500–6,000 | €16–20 | 3.8–4.5% | | Moncloa / Argüelles | €4,500–5,500 | €15–19 | 3.8–4.5% | | Tetuán / Cuatro Caminos | €3,500–4,500 | €14–18 | 4.5–5.0% | | Carabanchel / Usera | €2,500–3,500 | €11–15 | 5.0–5.5% |

Peripheral zones with higher gross yield

| Area | Average price €/m² | Average rent €/m²/month | Gross yield | |---|---|---|---| | Vallecas / Vicálvaro | €2,000–2,800 | €10–14 | 5.5–6.5% | | Villaverde / Getafe | €1,500–2,200 | €8–12 | 6.0–7.0% | | Henares corridor (Alcalá, Coslada) | €1,800–2,500 | €9–13 | 5.5–6.5% |

Property type and its impact on yield

Small flats (studios and one-bedrooms)

These are the assets with the highest gross yield and fastest lettability. A 35–45 m² studio in Chamberí or Tetuán rents within days. The trade-off is higher tenant turnover (12–24 month tenancies) and more intensive management.

Typical gross yield: 4.5–5.5% in central areas, up to 6% in secondary zones.

Family flats (3–4 bedrooms)

More stable tenants (families stay 3–5 years), lower gross yield but lower vacancy. Particularly in demand near international schools (La Moraleja, Pozuelo, Las Rozas).

Typical gross yield: 3–4% in premium zones, 4–5% in secondary areas.

Luxury properties (€800,000+)

Madrid's luxury rental market has grown significantly with the arrival of international executives. Monthly rents of €3,000–8,000 are not unusual in Salamanca or La Moraleja.

Typical gross yield: 2.5–3.5%. Returns are measured more in capital appreciation and tenant quality than current yield.

Short-let versus long-term rental

Short-term letting (Airbnb, Booking) can appear to offer gross yields of 7–10% in central Madrid. However:

• Regulation: Madrid has significantly restricted short-let licences. Without a licence, tourist rentals are illegal and can incur fines of up to €60,000.
• Management: Requires cleaning, check-in/out management, and constant communication. A management company is essential unless you are present.
• Real occupancy: Annual occupancy rarely exceeds 70–75%, including low season.
• Maintenance costs: Significantly higher than long-term rentals due to intensive use.

Net yield from managed short-let property typically ends up similar to or below that of well-managed long-term rentals, with considerably more operational complexity.

Tax on rental income for non-residents

If you purchase in Madrid and rent it out as a non-tax resident in Spain, you pay IRNR (Non-Resident Income Tax). The general rate for residents in countries with a treaty with Spain is 19%. Expenses are deductible (mortgage interest, IBI, community fees, depreciation).

If you are a tax resident in Spain, rental income is taxed under IRPF. For habitual residences of the tenant, you can apply a 60% reduction on net rental income — significantly cutting the tax liability.

This difference makes net after-tax yields very different depending on your profile. Calculating both scenarios before purchasing is essential.

Factoring in acquisition costs

The return on a property investment cannot be calculated without including the purchase costs. For a resale property in Madrid, taxes and acquisition fees add 6–7% to the real cost of the investment. This extends the capital recovery period.

Example: a €300,000 flat with a 5% gross yield would generate €15,000/year. But the real acquisition cost, including taxes and fees, is ~€320,000. The real gross yield is 4.7%, not 5%.

Market context

Madrid's rental market has had structurally higher demand than supply for several years. Rental prices have risen consistently, particularly in central areas, while the supply of flats available to rent has contracted — through conversions to tourist use, sales, and new landlords reluctant to enter the market.

This structural dynamic means vacancy rates are low across virtually the whole city, and forecasts point to sustained or rising rents in the near and medium term. For investors, this is a positive signal for expected returns.

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References:

• Banco de España — Housing market indicators (quarterly data).
• Idealista Research — Rental yield report by area (Q1 2026).
• Agencia Tributaria — Income from real estate capital: residents and non-residents.