Renovation costs for a rental flat: what you recoup and what never to do

Deciding whether to renovate a flat before letting it is one of the decisions with the biggest impact on the final yield of the investment, and also one where investors most often get it wrong. Some investors renovate too much (they spend more than the rental market in that area can pay back) and some don't renovate enough (the flat takes twice as long to let or lets for less than its potential). Neither situation is good. This article sets out the right decision framework and puts real numbers on the table.

The principle that governs any renovation decision

The fundamental rule is simple, although it's often misapplied: renovate as little as you need to let at the market price for the area. Not to have the nicest flat in the building. Not to satisfy your personal taste. To let at the market price for that specific area with the shortest possible void period.

A neighbourhood's rental market has a price ceiling. If, in neighbourhood X, 80m² flats let for between €650 and €750/month regardless of whether they've been renovated with premium or standard materials, renovating with premium materials doesn't earn you more rent. It just cost you more. The price premium that justifies an expensive renovation exists in some markets (high demand, little supply, a demanding tenant profile), but not in all of them.

The types of renovation and their real costs in 2026

Not all renovations are the same. You have to distinguish between levels of intervention with very different costs and returns:

• Basic cosmetic renovation (€1,500-5,000): Painting all the walls and ceilings, a deep clean, small repairs to taps and doors, replacing any decorative element that detracts from the value (old light fittings, dated handles, broken blinds). This minimal intervention can significantly improve the look of the flat without a big investment. Time: 2-5 days. Payback in rent: possibly a shorter time to let rather than a higher price.
• Partial renovation (€5,000-15,000): Renovating the bathroom or the kitchen (one of the two, not necessarily both), replacing the flooring if it's badly worn, upgrading the electrics if they're obsolete. This intervention can raise the rent by between 10% and 20% in high-demand markets. Time: 2-4 weeks depending on the scope. Payback: usually 2-4 years of extra rent.
• Full renovation (€15,000-45,000): A complete renovation of the kitchen, bathroom(s), floors throughout, electrics and plumbing, and interior and exterior joinery if necessary. The result is a completely new flat that can be let at the top reference price in the market. Time: 6-14 weeks. Payback: depends on the market, between 3 and 8 years of extra rent.

What a renovation really costs: the numbers quotes don't include

Builders' renovation quotes are the price of the work, not the total cost of the renovation. Investors going through their first renovation learn this the expensive way. The hidden costs you always need to add:

• IVA on the work: IVA (Spanish VAT) at 21% (or the reduced 10% if certain conditions are met) applies to labour and materials. Many quotes show prices without IVA. Always confirm whether the price includes or excludes tax.
• Unforeseen problems: In renovations of flats more than 30 years old, surprises are inevitable. Hidden damp behind the tiling, pipes in worse condition than expected, problems with the floor structure, wiring that needs more metres redone than expected. A 15-20% cushion on top of the initial budget is the prudent minimum.
• Voids during the renovation: While the flat is being worked on, it earns no income. If the expected rent is €800/month and the renovation takes 8 weeks, the opportunity cost is €1,600 that doesn't reach your bank account. That cost has to be added to the works budget when you calculate the real return on the renovation.
• Furniture and appliances: If you want to let the flat furnished (which in many markets, especially university and short-term ones, is practically a must), the cost of basic furniture (beds, wardrobes, sofa, table, chairs, basic appliances) can add up to between €3,000 and €8,000 for a standard fit-out with no luxuries.
• Building licence: Works that need a municipal licence (structural changes, changes to the layout, work on the façade) carry a licence fee that varies by municipality but can add up to several hundred or several thousand euros, depending on the work.

What to renovate first: the hierarchy of returns

If the budget is limited and you have to prioritise, this is the typical hierarchy of returns in the Spanish residential rental market:

1. Electrics: If they're obsolete and don't comply with the REBT (Reglamento Electrotécnico para Baja Tensión, the Spanish regulations for electrical installations), upgrading them is essential to let legally. It's not optional. Typical cost for an 80m² flat: €3,000-5,000.
2. Kitchen: The room that has the biggest impact on how a tenant sees the flat at a viewing. If the kitchen looks acceptable but the units are in poor condition, replacing the cupboard doors (without touching the carcasses) can transform its look for €800-1,500. If it needs a complete renovation, budget €6,000-12,000.
3. Bathroom: The second room with the biggest impact on the tenant's decision. A functional but dated bathroom can be improved with new sanitaryware and tiling for €3,000-6,000. A complete renovation costs between €5,000 and €10,000.
4. Floors: If the terrazzo or parquet floors are badly worn, switching to mid-range laminate flooring throughout (excluding the bathroom and kitchen) can cost between €1,500 and €3,500 in an 80m² flat and visually transform the whole space.
5. Painting: Always the renovation with the best cost-to-impact ratio. A coat of good-quality paint throughout costs between €600 and €1,500 including labour and gets rid of practically any sense of age. Always the first job to do.

What you should never do when renovating a rental flat

• Use premium materials for a standard rental: A €1,000 granite worktop and designer taps in a flat in Carabanchel that lets for €850/month are money down the drain. The tenant doesn't pay more for them. The market has a ceiling.
• Renovate without knowing the market price for the area: Before spending on a renovation, check how much a comparable renovated flat in that area actually lets for (not how much is being asked). If the difference between renovated and unrenovated is €50/month, a €20,000 renovation takes 33 years to pay back. It makes no sense.
• Choose very personal materials or colours: A rental flat has to appeal to as many potential tenants as possible, not to the owner. Neutral colours (white, light grey, beige), standard materials and a functional layout are the formula. Bold aesthetic choices shrink the pool of possible tenants.
• Not getting at least 3 quotes: Builders' prices vary enormously for the same job. On renovations of more than €5,000, the difference between the cheapest and the most expensive quote can be 40-60%. Getting three comparable quotes (same scope of work) before hiring anyone is the reasonable minimum.
• Paying everything up front: The usual payment structure for renovation work is: 30% up front to start, 40% halfway through once the work done has been checked, and 30% on final handover. Never 100% up front, however much you trust the builder.

Analysing the return on a renovation: how to work out whether it's worth it

The basic formula for knowing whether a renovation is justified financially:

Payback period in years = Total cost of the renovation / (Monthly rent increase × 12)

Example: a €12,000 renovation that lets you raise the rent from €700 to €850/month. An increase of €150/month → €1,800/year. Payback period: 12,000 / 1,800 = 6.7 years. Is it worth it? It depends on your investment horizon. If you plan to keep the flat for more than 7-8 years, yes. If you plan to sell in 3 years, probably not.

You also need to add the effect on the sale value if there's a chance you'll sell: a renovated flat sells faster, and at a price between 5% and 15% higher than an unrenovated one in the same building and area. That potential price difference also counts in the analysis.

Related resources: To work out whether the investment in a renovation improves the deal's net cash flow, the guide on how to calculate real cash flow sets out the method. For bank-owned assets that need renovating and whose purchase price already discounts that investment, bank-owned properties are the natural market. If the renovation involves a change of use (from office to home or from commercial premises to residential), the article on converting commercial premises into a home covers the whole process.