How to invest in real estate with the triple lease model
Real estate investment is one of the oldest methods of generating returns; however, its capacity for innovation and exploration of new formats seems limitless. Beyond purchasing assets for subsequent sale or rental, other alternatives have emerged, such as bare ownership, participatory financing through crowdfunding and crowdlending, or the well-known house flipping, among many others.
One of the latest trends in this area is the triple lease model, a system based on three simultaneous operations, generating three different income streams, and accessible to any homeowner.
How does the process work?
The triple lease model involves three steps that are typically carried out in the following order:
- Renting a new home: The homeowner rents a property that better suits their specific needs, whether in terms of space, cost, or both.
- Renting out their primary residence: At the same time, the homeowner rents out their own home, creating a monthly income stream.
- Purchasing a third property to rent out: Alongside the first two steps, the homeowner acquires a third property, also intended for rental, generating the third stream of income.
Factors supporting the success of triple lease in Spain
Starting with just one property—residential in this case—the investor implements a profitability strategy that is particularly well-suited to the specific characteristics of the Spanish real estate market:
- High demand for rental housing: An analysis by Fotocasa Research highlights the imbalance between supply and demand. While demand stands at 77%, only 19% of homeowners offer their properties for rent. This rental pressure is reflected in prices, which are particularly high in areas like the Balearic Islands (€1,602), Barcelona (€1,598), and Madrid (€1,497). However, six other provinces exceed the €1,000 mark: Vizcaya (€1,421), Guipúzcoa (€1,224), Málaga (€1,189), Las Palmas (€1,075), Valencia (€1,039), and Santa Cruz de Tenerife (€1,037). Despite these high costs, demand remains strong. A report by the Rental Observatory of the Fundación Alquiler Seguro and the Universidad Rey Juan Carlos estimates that for every property listed for rent, 115 people show interest within ten days.
- Attractive profitability: The gross profitability of buying a property to put it on the rental market in Spain can be highly appealing. According to Idealista, during the third quarter, it reached 7.2%, one percentage point higher than in the same period of the previous year. Fotocasa estimates that renting out an average property of about 80 square meters offered a 6.1% return in September. However, it also highlights that renting by the room increases this figure to 9.3%.
- Favorable financing conditions: The European Central Bank (ECB) has implemented a series of gradual interest rate cuts in recent months, bringing the deposit rate down to 3.25%. Additionally, the Euribor, the benchmark for variable mortgage rates, is at annual lows. Furthermore, it has diverged significantly from official rates, with a downward spread of around 2.5% in recent days, despite some fluctuations. ECB forecasts suggest a further reduction of 0.25 percentage points in rates, creating a more favorable scenario for homebuyers.
In this way, the combination of income and expense flows generated by the triple lease formula can serve as a conservative and diversified investment option. Investors not only retain ownership of their original asset but also acquire a new one, while simultaneously generating income streams that make the operation viable.