Spain: €50,000 flats rented at €600 — the math that doesn't add up

€50,000 flats rented at €600: the returns that don't add up

There's a calculation doing the rounds in property investment circles that, at first glance, looks like the holy grail of real estate: buy ten €50,000 flats in Tarragona, rent them out at €600 each and pocket €6,000 a month. The thesis was put forward by an investor on a TV show and the figure has spread like wildfire: with €150,000 down and a €350,000 mortgage over 25 years, the monthly payment would be €1,166. Subtracting €2,000 in expenses, that leaves €4,000 in profit. A luxury salary. The problem is that this calculation falls apart the moment you scratch the surface.

Where the €50,000 flats come from

The first thing that stands out is the return arithmetic. If a €500,000 flat in Barcelona rents for €1,300, the ratio is 0.26% per month. Applied to a €50,000 flat, the rent should be €130, not €600. That figure isn't arbitrary: it's what anyone comparing assets would come up with. Those defending the deal claim that in the city of Tarragona there are dumps at that price, but the reality of the Spanish property market points the other way: €50,000 flats are in run-down neighbourhoods, with troublesome homeowners' associations, outstanding repair levies and a tenant profile that, more often than not, pays late or doesn't pay at all.

The buyer's own profile gives the game away. Those who boast about owning ten €50,000 flats don't live in one of them. They live in detached houses or nice apartments, and run the business from there. Nobody who can afford to live in a decent area moves into a €50,000 flat to live in it. The deal only makes sense when viewed from the outside, as a rent-extraction business in neighbourhoods where rental demand is high because people can't afford to buy.

The expenses that eat the profit

The €4,000 net profit calculation ignores items that in practice take a significant bite. To start with, financing: mortgages for second homes don't come with the terms of a primary residence. Banks typically finance at most 60-70% of the value, demand more guarantees and apply higher spreads. With €150,000 down, the rest isn't covered by the mortgage alone: you have to add taxes, notary, registry fees and possible renovations. In flats at that price, a full renovation is almost mandatory.

Then there's the day-to-day. Property tax (IBI), homeowners' association fees, insurance, repairs and missed payments eat up a far from negligible percentage. A realistic calculation brings the monthly profit well below €4,000. And there's a factor that doesn't appear in spreadsheets: time. Managing ten flats in troubled neighbourhoods is a full-time job. Tenants call at three in the morning because a lightbulb has blown, contracts have to be renewed, flats sit empty between tenancies and illegal squatters can leave a property locked up for months. The 14% gross return attributed to these deals shrinks to half, or less, once all costs are deducted.

Legal risk and defaults

Spanish law protects tenants with a robustness that puts off more than one investor. Evictions for non-payment drag on for months, sometimes years, and during that time the owner keeps paying the mortgage, the association fees and taxes. Rent default insurance covers part of it, but not everything, and insurers are increasingly selective about the tenant profile and the property's location. In run-down neighbourhoods, they simply refuse the policy.

Squatting is another ghost. An empty flat in a troubled area is a magnet for squatters, and recovering it through the courts can take more than a year. During that time, the owner doesn't just earn nothing: they keep paying. The combination of arrears, squatting and legal costs can turn a theoretically profitable investment into a money pit.

The alternative: fewer flats, better locations

Against the strategy of accumulating cheap flats, some argue for the opposite: buying fewer properties but in solid locations. A €130,000 flat in a normal area rents for €700, and although the percentage return is lower, the probability of default plummets and resale is far easier. Geographic diversification also matters: owning four flats in Hospitalet, near Barcelona, lets you manage them in person and react quickly to any problem. Owning ten in Tarragona, an hour away, multiplies the trips and the hidden costs.

The underlying debate isn't just economic. It's also ethical. Some argue that squeezing run-down neighbourhoods by renting out dumps at disproportionate prices is a form of speculation that worsens the housing problem. Others reply that without those rentals, many families would have nowhere to live. The tension between profitability and social responsibility runs through the whole sector.

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With these numbers, the ten-flat, €50,000-each deal looks more like a marketing story than a replicable reality. The return exists, but it isn't the one being touted, and the risks are far greater than the headline suggests. Anyone with €150,000 to invest would do well to look beyond the shine of €6,000 a month. Cheap bricks come at a price, and it isn't always paid in euros.