The area that has the most multicultural entity in Madrid is Lavapiés!
It has for a long time been considered as the least attractive area to live in because of its bad reputation, but it is slowly evolving for the better. You will definitely find affordable apartments in this part of town. Lavapiés is a diverse neighborhood, with a large Indian and African community, but not only that: it is also still known for its traditional bars and shops.
The atmosphere of the nightlife of Lavapiés can be divided into three parts. South of the Plaza are several bars and cafes with a bohemian vibe and many terraces during the summer. Calle Ave María and East of it, are many alternative bars not to mention fringe meetings (parties or artistic/musical meetings) also happen in abandoned or unlicensed premises. There are also several shisha bars and a cafe selling the Madrid renowned Zapatilla, a 1K sandwich made with ham and cheese. In general, Lavapiés is a good area to love in if you want to discover a new side of Madrid.
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