Landlord who put down 20% and expected tenants to pay 70% of the flat

The landlord who put down 20% and expected tenants to pay 70%

There is a type of landlord who puts down 20 or 30% on a flat and counts on the tenant paying the remaining 70% of the price. That model is dead, according to the thesis that opens the debate, and its end will translate—by that same reading—into a wave of evictions for non-payment in the coming months. The alternative that emerges has two doors and neither is comfortable: sell quickly before the bank forecloses, something that is rarely done in time because the owner prefers to hold out on the price until the third foreclosure notice, or rent and risk the tenant paying five months and then disappearing. The problem is not just late payments: recovering the property becomes a long and expensive process.

What return does a rental flat really yield?

The numbers being handled are not those from the real estate brochure. The Bank of Spain puts the average return on buying a home to rent it out at 6.5%, a percentage that according to several participants does not compensate for managing tenants, periods without payment or the risk of occupation. Others refine further and speak of a 4-5% net, after deducting expenses. On the other side, the comparison with the MSCI World, which in the cited material yields somewhat more than that 6.5% and does not require calling anyone to pay at the end of the month.

The defence of real estate profitability also appears in the discussion. On an investment of 300,000 euros, that 6.5% becomes 19,500 euros a year, more than a typical salary in Spain (about 1,200 euros a month in 14 payments). And the asset, it is argued, appreciates with inflation, can be sold and allows recovering the investment. The rebuttal is that this appreciation is a gain on sale, not income, and that rental yield is more like a dividend than anything else.

150 flats at 300 euros and more than 100,000 a month in mortgages

The most striking case is not that of the individual with a second flat. Information published by elEconomista.es describes a 39-year-old landlord with 150 flats in portfolio, who pays more than 100,000 euros a month in mortgages and rents at an average of 300 euros. The accounts jar in the same sentence: 150 homes at 300 euros add up to 45,000 euros in gross income per month. That leaves 55,000 short to cover the debt. The detail of how that gap is sustained—or if it is not sustained—is precisely what no one manages to close.

9-square-metre hovels selling for 250,000 euros

At the opposite end of the market is the case of spaces converted into housing: 9 square metres for 1,250 euros a month, with a purchase of 60,000 euros, a renovation of 30,000 and a subsequent sale price of 250,000. It is the kind of operation that some point to as proof that the problem is not rental income, but the conversion of any gap into a financial asset.

Who is the speculator: the small landlord or the big fund?

Here the discussion splits. One current holds that the small landlord—the one who inherits a flat among siblings or supplements their salary—is not comparable to an investment fund, and that attacking them ends up reducing supply and making whatever remains more expensive. Another responds that they aspire to the same thing, only without a legal team to fight over every comma of the contract, and that the withdrawal of homes from the rental market heralds less supply and higher prices, not lower. A third group is clear: risk is risk and whoever took it on must face the consequences.

The pending decree and the homes that stop being rented

The political plane is also not closed. The rental decree is still pending parliamentary approval and its fate depends on formations such as Junts, whose refusal would leave it dead. It is also argued that no administration will encourage mass non-payment to the banks, and that regulation in recent years has gone in the opposite direction to that of the private landlord. The count cited is twelve regulations in six years.

With that panorama, some owners have already made a move: one relates that in July of last year he took his flat off the rental market to have it available, without knowing when he will offer it again. The practical consequence is a shorter supply and prices that hold or rise.

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The point where the analysis gets stuck is always the same: if the small landlord exits the rental market, what takes their place? Some see funds buying cheap the stock that no one can pay for. Others see less supply and higher rents. The data to decide, for now, is not on the table.