1% Rule in Barcelona: kinda impossible. Worth investing anyway?

Question

I’m considering investing in some rental properties in Barcelona.

However I’m struggling to find places that respect the 1% rule. Monthly rent ends up being far below 1% (we look at 0.5% at max, at least in the city center).

Considering the very low mortgage rates, I should still be able to return some cash flow.  However, I’m concerned that investing in a somewhat overvalued property (at least when it comes to buy-rent ratio) I might be committing some rookie mistakes.

Thoughts?

Account Closed · Answer

@Daniel Rongo

I’d be cautious with Barcelona, the political situation is very shaky and some more turmoil could seriously spook foreign investors and crash the market

Daniel Rongo · Answer

Thanks Adrià

Adrià Creixell · Answer

Hi,

Sorry, I was thinking that the american rule was 2%. 1% could be made in some places maybe... Now eveything is becoming expensive, but one year ago it was possible to buy a property for 30k and get 350-400 euros per month.

I´m focused on flipping, then I´m not that informed about buy&hold on the different cities of Spain. But Barcelona is becoming a difficult city for the investors.... I think that in all Europe is time to avoid capitals and Tier 1 cities...

Daniel Rongo · Answer

Hey Adrià,

That would be a dream - I would be content to rent $1k for a $100k property, but that seems an impossible dream too :)

It seems that Barcelona investors are all about Airbnb and capital appreciation (at least in Eixample).  I feel this is polluting the market - or at least ruining the plans for investors like me.

Although mortgage IR at ~2.5% makes me think whether there’s still money to be made on rental?

Ps thanks for the Valencia tip, I was looking into that, as well as Malaga.

Adrià Creixell · Answer

Hello Daniel,

I don't think that in Europe is possible to fullfill that rule. 2000 euros of rent for a 100.000 euros property, almost impossible...

We find yields of 7-10% in Valencia.

Regards.