We booked the hostel for three nights and told the couple to expect us to arrive at night, but due to transit issues we did not arrive until the next morning. The man was grumpy about it, repeatedly telling me that he waited all night for us, but we paid him for that night and everything was better. They're actually a sweet couple, and they're very accommodating. They would answer the door at any hour of the night, allowing us to check out the nightlife in the nearby Puerta del Sol area. The hostel's location is great, and the price very reasonable (4 travelers, 70 Euros/night). They also allowed us to stick around in the hostel while waiting for our train. Highly recommended!

Sabino and Anuncia were excellent inn keepers. They don't speak English but if you know the basics you will do fine. 40.00 euros was cheap and perfect location. Just 5 minutes away from Puerta del Sol. We walked everywhere, was a great exercise. They keep the rooms clean. We got the room with the balcony and was awesome; every night we had a glass of wine and enjoyed the beautiful view from the balcony.

You can't beat the price. The cheapest and perfect location.

This is not the place for anyone who wants a modern hotel, but is excellent for anyone whose primary needs are for clean, safe, cheap and great location. There is no online booking - you must book by phone in Spanish.

I read about Pension Arcos in Rick Steves' guidebook and I LOVED it. A small double room with a full en suite bath was only 40€ per night, and it is seriously no more than a 5 minute walk to Puerta del Sol, the CENTER of Madrid. However, if you are looking for luxury DO NOT STAY HERE! If you want inexpensive, safe and, well, quaint, this place is a bonanza.
Anuncia and Sabino (proprietors) speak no English- you'll need your Spanish in order to reserve a room- no more than the day before your arrival. It's on the top floor of a building that has been given over almost entirely to hosteles/pensiones- but there is a charming, antique (small but powerful) elevator. When you walk in to the place, it is almost like stepping in to your Aunty's or Grandmother's place- NOTHING is new, but it is all clean and well maintained.
Anuncia made sure that we knew where we were headed- took us through the lounge area out to the terrace and pointed out the street we needed in order to reach our destination. That terrace alone would be worth 40€ during the warmer months of the year!
My ONLY complaint is that, when we returned to the room to study for the finals we had to take when we returned to Barcelona after a day out visiting museums, eating AWESOME food and flirting with CUTE Madrid police officers, it was COLD. So cold that we hunkered down under the bevy of blankets on our beds. We cranked the dial on the old radiator, to little effect, but when we returned from dinner, it had warmed up enough to be comfortable in street clothes. Full disclosure: I don't do well in the cold. I live on Maui and am currently attending school in Barcelona which is a good 20°F warmer than Madrid.
If you are a Rick Steves' devotee, you will ADORE this place- and Anuncia is a huge fan of Rick and the people that have come to her through his recommendations.