Planning a trip to Spain's energetic capital? Discover the top 12 best cheap budget hotels and hostels in Madrid near transit, supermarkets, and tapas bars.Madrid is a city of pure energy, world-class art, and legendary nightlife. From the historic grandeur of the Royal Palace to the masterpieces inside the Prado Museum, Spain’s capital captures the heart of every traveler who visits. While it is a bustling European metropolis, it remains remarkably accessible for those traveling on a budget if you know exactly where to set up camp.The key to keeping your Madrid trip affordable is choosing a strategic location that cuts down your transit costs. Most of the top cheap hotels and hostels are clustered around Puerta del Sol, Gran Vía, the bohemian Malasaña, or the multicultural streets of Lavapiés. Staying in these neighborhoods ensures you can explore the city’s major plazas entirely on foot, saving your euros for delicious food instead of subway tickets.While you won't find 7-Eleven convenience stores in Spain, Madrid's central districts are densely packed with local equivalent supermarket chains like Carrefour Express, Dia, Mercadona, and Lidl. For cheap eating options, you can bypass formal restaurants and head directly to traditional taverns for a bocadillo de calamares (squid sandwich) or look for a menú del día (menu of the day), which offers a massive three-course meal for a fixed, low price.Here is our review of the top 12 best cheap budget hotels and hostels in Madrid.1. The Hat MadridAddress: Calle Imperial 9, 28012 Madrid, SpainApproximate Price: $26 – $48 USD (Dorm) / $95 – $135 USD (Private Room)Location & Budget AppealThe Hat Madrid is located just steps from the iconic Plaza Mayor. It is arguably the best budget location in town because it places you squarely within the historic center, meaning you can walk to the Royal Palace and Sol without spending a cent on public transportation.Facilities & Nearby AmenitiesHoused in a beautifully renovated 19th-century mansion, this eco-friendly hostel features a spectacular rooftop bar where guests can enjoy affordable drinks with a view. It offers a shared kitchen, bright common spaces, and free walking tours. The Tirso de Molina Metro Station is nearby, a Carrefour Express is around the corner, and the surrounding alleyways are filled with cheap local tapas bars.👉 Check the latest prices and availability on Agoda here2. Cats Hostel Madrid SolAddress: Calle de Cañizares 6, 28012 Madrid, SpainApproximate Price: $22 – $40 USD (Dorm)Location & Budget AppealSituated in the vibrant Huertas neighborhood, Cats Hostel is an institution for social travelers. It offers incredible budget appeal because it sits in the absolute sweet spot for nightlife, allowing you to walk back safely after a night out without paying for late-night taxis.Facilities & Nearby AmenitiesBuilt around a stunning, historic Andalusian courtyard, this lively hostel offers a famous on-site bar, laundry facilities, a shared kitchen, and organized pub crawls. The Antón Martín Metro Station is just a 3-minute walk away. A well-stocked Dia supermarket is close by, alongside traditional bakeries serving cheap morning churros.👉 Check the latest prices and availability on Agoda here3. Sungate OneAddress: Calle de Carmen 16, 28013 Madrid, SpainApproximate Price: $25 – $45 USD (Dorm)Location & Budget AppealTucked into a pedestrian-only shopping street directly off Puerta del Sol, Sungate One boasts the ultimate downtown location. It is a dream base for backpackers who want to step out their front door and instantly be in the geometric center of Madrid's transit lines.Facilities & Nearby AmenitiesThis exceptionally social hostel stands out because its dorm rooms feature no bunk beds, opting for comfortable single beds instead. It provides a fully equipped guest kitchen and a relaxed lounge area. The Sol Metro and Train Station is right down the block, backed by an easily accessible El Corte Inglés supermarket and endless low-cost takeaway food shops.👉 Check the latest prices and availability on Agoda here4. TOC Hostel MadridAddress: Calle del Arenal 18, 28013 Madrid, SpainApproximate Price: $28 – $48 USD (Dorm) / $95 – $145 USD (Private Room)Location & Budget AppealLocated on Calle del Arenal, a major historic pedestrian thoroughfare, TOC Hostel bridges the gap between the Opera House and Puerta del Sol. It lets you experience upscale, secure central living at a highly competitive budget rate.Facilities & Nearby AmenitiesFeaturing a sleek, modern Scandinavian design, this property offers advanced fingerprint security access, a trendy on-site bar and cafe, pool tables, and an immaculate shared kitchen. Public transit links at Opera and Sol are practically at your doorstep, a local Carrefour Express handles quick grocery runs, and cheap historic slice-pizza shops are abundant nearby.👉 Check the latest prices and availability on Agoda here5. Safestay Madrid CentralAddress: Calle de Sagasta 22, 28004 Madrid, SpainApproximate Price: $22 – $42 USD (Dorm) / $80 – $120 USD (Private Room)Location & Budget AppealSafestay Madrid sits on the border of Chamberí and the trendy Malasaña district. This location is a brilliant budget hack because it puts you right next to Madrid's hipster heart—filled with vintage clothing stores and indie coffee shops—while remaining blissfully quiet at night.Facilities & Nearby AmenitiesHoused in an elegant palace building, the hostel features a private cinema room, a magnificent rooftop terrace bar, custom modern bunk beds, and a guest kitchen. The Alonso Martínez Metro Station is just across the square. A large Mercadona supermarket is a short walk away, surrounded by budget-friendly student bars and casual burger joints.👉 Check the latest prices and availability on Agoda here6. Ok Hostel MadridAddress: Calle de Juanelo 24, 28012 Madrid, SpainApproximate Price: $25 – $45 USD (Dorm) / $85 – $120 USD (Private Room)Location & Budget AppealOk Hostel is located in the historic La Latina neighborhood, famous for its Sunday El Rastro flea market and traditional open-air terrace culture. Choosing this spot lets you live like an authentic Madrileño without paying premium central real estate prices.Facilities & Nearby AmenitiesThis highly rated hostel is famous for its delicious, cheap communal family dinners that help travelers save big on food costs. It features custom wooden pod beds with privacy curtains, a shared kitchen, and a cozy bar. The La Latina Metro Station is down the street, backed by a nearby Dia market and a vast array of inexpensive traditional tapas bars.👉 Check the latest prices and availability on Agoda here7. Generator MadridAddress: Calle de San Bernardo 2, 28013 Madrid, SpainApproximate Price: $28 – $50 USD (Dorm) / $95 – $145 USD (Private Room)Location & Budget AppealGenerator Madrid is located just a few steps away from the bustling Gran Vía avenue. Finding a stylish, premium accommodation option at this price point on Madrid's primary theater and shopping boulevard is a massive budget victory.Facilities & Nearby AmenitiesPart boutique hotel and part hostel, Generator offers an impressive rooftop terrace complete with relaxing hot tubs, a stylish ground-floor bar, laundry facilities, and private electronic lockers. The Santo Domingo Metro Station is right outside. A convenient Carrefour Express is around the corner, alongside dozens of quick-eat takeaway spots.👉 Check the latest prices and availability on Agoda here8. Latroupe Prado CastellanaAddress: Paseo de las Delicias 1, 28045 Madrid, SpainApproximate Price: $26 – $46 USD (Dorm) / $90 – $135 USD (Private Room)Location & Budget AppealLatroupe Prado is situated right near the golden art triangle (Prado, Reina Sofía, and Thyssen museums). It is a phenomenal logistical hub because it sits directly across from the Atocha Train Station, eliminating the need for expensive city transfers if you are arriving by regional train or airport express bus.Facilities & Nearby AmenitiesThis ultra-modern hybrid property offers chic co-working spaces, high-speed Wi-Fi, an internal cafe-bar, guest kitchens, and comfortable privacy beds. The Atocha Metro and rail hub is a 2-minute walk away. A well-stocked Ahorramas supermarket handles all grocery needs, and cheap neighborhood cafes surround the station area.👉 Check the latest prices and availability on Agoda here9. Motion Chueca HostelAddress: Plaza de Chueca 5, 28004 Madrid, SpainApproximate Price: $22 – $40 USD (Dorm)Location & Budget AppealMotion Chueca sits directly inside the colorful, progressive Chueca neighborhood. This lively area is highly celebrated for its welcoming atmosphere, pride festivals, and trendsetting street culture, keeping your stay exceptionally fun without demanding central premium rates.Facilities & Nearby AmenitiesThe property offers bright, air-conditioned rooms, a functional guest kitchen layout, a daily breakfast option, and secure luggage storage. The Chueca Metro Station is steps away in the center of the main square. A local Supercor market handles shopping needs, and the neighborhood is packed with affordable international food spots and local bakeries.👉 Check the latest prices and availability on Agoda here10. Ibis Budget Madrid Centro Las VentasAddress: Calle de Alejandro González 1, 28028 Madrid, SpainApproximate Price: $65 – $100 USD (Private Room Only)Location & Budget AppealFor couples, families, or business travelers who prefer corporate hotel privacy over shared hostel dorms, this property is a stellar choice. Located slightly east of the immediate center near the historic Las Ventas Bullring, it avoids high downtown rates while keeping you connected to the city core via a brief metro ride.Facilities & Nearby AmenitiesThis reliable budget hotel provides simple, soundproofed private rooms with en-suite bathrooms, air conditioning, free fast Wi-Fi, and an affordable breakfast buffet. The El Carmen Metro Station is right nearby, providing a direct line to Gran Vía. A massive Lidl supermarket is close by, surrounded by authentic local neighborhood taverns charging non-tourist prices.👉 Check the latest prices and availability on Agoda here11. Hostal PersalAddress: Plaza del Ángel 12, 28012 Madrid, SpainApproximate Price: $70 – $110 USD (Private Room Only)Location & Budget AppealHostal Persal is a charming historic budget hotel located right next to Plaza de Santa Ana. It offers a calm, intimate environment that is perfect for travelers who want a private hotel room directly in Madrid’s literary quarter without paying high boutique rates.Facilities & Nearby AmenitiesHoused in a traditional 19th-century building, it features clean minimalist private rooms, flat-screen TVs, private bathrooms, and an on-site breakfast room. Its central position means the Sol transit hub is a brief walk away, backed by a nearby Carrefour Express market and classic local taverns serving affordable traditional Spanish tapas.👉 Check the latest prices and availability on Agoda here12. B&B HOTEL Madrid Centro Puerta del SolAddress: Calle de la Montera 10, 28013 Madrid, SpainApproximate Price: $80 – $125 USD (Private Room Only)Location & Budget AppealFinding a private, clean hotel room from a trusted chain directly on Calle de la Montera—the street connecting Sol and Gran Vía—is an incredible budget win. It places you in the absolute bullseye of downtown Madrid, allowing you to walk to all major attractions and drop your public transport spending down to zero.Facilities & Nearby AmenitiesThis highly reliable property offers modern private rooms with exceptionally comfortable bedding, air conditioning, free high-speed Wi-Fi, and complimentary 24/7 hot coffee and water in the lobby. Every major metro and train line is within a 2-minute walk, backed by a massive El Corte Inglés supermarket and endless quick-eat options along the pedestrian street.👉 Check the latest prices and availability on Agoda here