This article was updated on May 20, 2025 to reflect recent changes to Airbnb laws in Madrid
Doubtless you have heard many stories about Airbnb. Some true, some a little dubious. Regardless, the platform has revolutionized the property rental market. It has made real estate investment accessible to individuals, even if they don’t have a background in finance or real estate investment. Do you have questions about whether it is a good idea to make a Madrid Airbnb investment? Here we address the FAQS most relevant in 2025.
Municipalities are beginning to regulate Airbnb rentals
After Airbnb expanded into Germany in 2011, beginning its international expansion, it started to grow very quickly. In 2022, there were 2.9 million Airbnb hosts/hostesses worldwide. In many European tourist capitals, Airbnb was supplanting traditional hotel stays. All major European cities now have significant numbers of Airbnbs.
Given this great success, a backlash began. Much of it was political: locals claimed that Airbnb investment was driving up real estate prices and making home ownership too expensive. In other cities, like Athens, hotel owners claimed that Airbnbs were degrading their businesses. In fact, Airbnb claims that the hotel lobby has been pushing the message that short-term rentals are to blame for housing shortages.
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Although the housing shortage arguments are mostly political, they nevertheless have caused significant changes in how local governments regulate Airbnbs. London began regulating short term rentals in 2017; a homeowner can only rent their property for 90 days of the calendar year. If they want to rent it for longer, they must apply to their local council for permission. Parisian authorities went one step further. They made a law that stipulated that if a homeowner wants to rent their property short term, it must be their primary residence. This essentially makes it illegal to purchase a property for investment purposes. Rome, Barcelona and Athens have also imposed restrictions on short term Airbnbs.
What restrictions has the Madrid government placed on short term tourist rentals?
Initially, the Madrid authorities didn’t completely ban short term rentals, they just tightened existing regulations. Tourist licenses were only granted to ground or first floor properties with no neighbors underneath. There were additional requirements that had to be met.
This is all changing in 2025. The City of Madrid has put a freeze on issuing any new licenses for short term rentals. Moreover, the authorities have issued stringent new regulations on existing short term rentals:
- Properties are issued a registration number that must appear on platforms such as Airbnb and all marketing materials.
- Accommodation providers are also required to collect sensitive personal information from their guests, including bank details and personal identifiers.
- There is a proposal to raise VAT on short-term rentals to match the 10% paid by hotels.
- Rental income is taxed at a flat rate of 24% for non-resident hosts.
- Hosts must collect a tourist tax of 3€ per person per night, applicable for stays of up to 14 nights.
Prior to 2025, the authorities didn’t strictly enforce many Airbnb regulations. This year, everything has changed. On May 20, 2025, the Spanish government ordered Airbnb to block over 65,000 rental listings on its platform that violate national regulations. They have also begun inspecting existing short term rentals to see if they adhere to the regulations. The government has stated that the new regulations won’t be fully enforced until 1 July. After that date, property owners risk fines of up to €600,000 (not a typo) for non-compliance.
Are there any options for Airbnb investment?
Yes! Madrid authorities still allow medium and long term rentals. We recommend renting your apartment medium term for the following reasons:
- Higher rental yields.
- Less risk of people over staying their lease. If someone has a year long lease and over stays, under Spanish law it can take a long time to evict them, even if they don’t pay rent.
- Fewer legal responsibilities.
- You can stay in your apartment a couple weeks, or even months, out of the year.
Is investing in an Airbnb property even lucrative anymore?
Yes, it is. Given the post covid trends of working remotely and people becoming digital nomads, Airbnb stays continue to grow around the world. This is particularly true for medium term Airbnb rentals. In the past, people largely rented Airbnbs for short term vacation stays. Now, an increasing amount of people rent Airbnbs to live/study in a city for a semester or even a few months.
Although returns are often a little lower when renting medium term Airbnbs vs. short term Airbnbs, the associated costs are much less. Furthermore, there is much less maintenance required, less wear and tear on the property and definitely fewer headaches. Having 2-3 tenants in your apartment every year (if you rent to students or digital nomads), vs. 50+ if you rent short term, means your Airbnb will be much lower maintenance under the new regulations.
PRO TIP: Since there are many rental properties in Madrid, how do you make your property listing stand out against the competition? You make your apartment unforgettable! If you do this, you will always have high occupancy rates. Renovate your apartment so it “pops” on internet listings. This will maximize the value of your Madrid property investment.
What are the best zones for Airbnbs in Madrid in 2025?
Since the “sweet spot” for optimizing Airbnb rental income in 2025 is medium term rentals (28 days – 11 months), we recommend certain neighborhoods for buying properties. This is because the target market for medium term rentals is students, academics and digital nomads. Furthermore, property prices in some neighborhoods (such as Chamartín) have appreciated considerably, so buying in a neighborhood like Tetuán will help you maximize your net rental yield.
There are two neighborhoods we recommend: Tetuán, if you want a larger apartment (3 bedrooms) or the Center if you want a one bedroom apartment.
Why you should make a Madrid property investment in 2025
To summarize, there are many reasons to make a Madrid property investment, even with the new restrictions on short term rentals.
You can make excellent returns
Madrid Estate clients earn, on average, a 4-5% return on their property investments. This is much higher than the net yield that most investors receive on their medium term property investments.
The sweet spot for Madrid Airbnb investment in 2025
Our recommendation is for clients to invest around 350k€ if they want larger apartments, or 250€ if they want smaller apartments in the Center. To learn more about the sweet spot for Madrid Airbnb investment in 2025, and view case studies, we recommend you read: Case study: Medium term Madrid property investment
You can diversify your investment portfolio
When most people invest, they think about buying domestic equities or bonds. However, the real estate asset class is by far the largest in the world. Before Airbnb, most main street investors did not have the knowledge or expertise to invest in real estate. Investing in a Madrid Airbnb will not only allow you to diversify your investment portfolio across asset classes, but will also allow you to add an international investment to your portfolio.
You revenue stream will be much more predictable than with other asset classes
Most students rent apartments for the entire school year: August-May. They rarely change apartments between semesters, so if you invest in a Madrid property and rent it medium term to a student, you can lock in a guaranteed return for ten months out of the year.
You will have a summer house in Europe
Summer is when most people choose to travel to Europe. If you rent your apartment to a student, you will have two months every summer to stay in your apartment, host friends/relatives or use it as a base to travel around Europe.
