One of the best options to improve profitability is housing reform or renovation, as it is important to outperform the competition with suitable qualities and finishes. An efficient and trouble-free operation is achieved after adapting the home by improving its distribution and decoration, among other aspects. By standing out from other homes, more customers at better prices are guaranteed.

Completed and decorated homes in operation are expensive, and it is difficult to obtain a better purchase price for them. It is not a theory; the press confirms it. Year after year, investors focus on the added value of the flats to be renovated,” said Leon Taurel, CEO of Alimbles.

Buy to renovate

The key is knowing the neighbourhoods with affordable prices and rental demand. For example, neighbourhoods within the M-30 have high prices, but they offer more security. The ones bordering the M-30 often have a purely residential destination.

A high percentage of those interested in buying a home look for options that require a complete renovation. It is the best way to guarantee quality, modernity, easy access to the market, the absence of defects, and a period of more than 20 years without incidents in the home to change everything.

It is convenient to know the price structure of Madrid:

  • Investments over 150,000 euros should focus on specific and simple neighbourhoods within the M30 and make capital out of housing for students.
  • An investment of 300,000 euros or more extends the options to the entire city, depending on the size and location of the home. In Madrid, we speak about costs between €4,000/m2 and up to €15,000/m2, never less than €1,500/m2.
  • If the investment is over 400,000 euros, you can access a medium or high range of flats with one room or more in good residential neighbourhoods, which open the market for accommodation for companies or for executives.
  • Luxury, however, has no limit and is above €10,000/m2.

Cost of investing in a Renovation

The cost of a renovation requires an investment that ranges between €400/m2 and €1,200/m2, usually €800/m2, depending on the condition of the home. In complex cases, demolition may even be required, and in those cases, you could even be required to build or hire a parking space. Other cases may require sanitation of the sewage system or roofs.

The return on the cost of the renovation can be immediate since the houses already renovated have an easy exit in the market and an interesting rental price. Its price is positioned above that of non-renovated homes. The key is to buy at a good price, which is easier in a home to be renovated than in a recently completed one.

When carrying out a purchase or renovation, financial leverage property adquisition is normally used. But to reduce the risks that caused the 2008 crisis, it is best not to finance more than 70%. A prudent measure is to calculate if, with a 20% drop in rental prices, you could continue paying the resulting mortgage payment and thus not have to invest more capital.

Reformists and architects used by DFLAT

Investing in renovation involves an additional cost that depends on the quality and whether it is an adaptation or a complete work in exchange for a cheaper acquisition.

If it is an adaptation, it is advisable to allocate a budget over €300/m2. If it is a complete work, you can assume over €1,000/m2 up to 1.500/m2 VAT apart. Our houses have been executed and acquired by Leon Taurel and by Francisco Hernández.

More information for investors in Real Estate

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