Hostal Jaen is a place that my wife and I stayed at. It has a flat with three bedrooms that would sleep four people very nicely. Check out the MadridMan website for more information. Click on hostals. Also, it has climate control, which will be needed in Madrid. You have to check it out. It is within walking distance of some very affordable restaurants and in between the Prado, Reina Sofa, and Thyssen art museums. Per night the cost is about 70 euros. That's less than 20 each! Good luck.