Why Investing in Rental Properties in Portugal is a Good Decision

Generally speaking, rental real estate is one of the best investment options today, especially if you pick the right location. Portugal is a highly desirable destination for real estate investment. But what is it about this country that has international investors flocking to Portugal? We’re about to reveal why investing in rental properties in Portugal is a good decision, so stay with us!

Where does Portugal real estate market stand in 2020?

Portugal has managed to recover from the economic crisis and become a major hotspot for real estate investment in less than a decade. Nowadays, it is one of the world’s most desirable destinations that attracts more international buyers every year. Last year, more than half of all real estate purchases were made by foreign investors, mostly from Brazil, France, and Great Britain. Local buyers also started returning to the real estate market.

This year has been less prosperous for the entire world, but the Portuguese are managing the COVID-19 crisis better than many other European nations. Portugal’s real estate prices are constantly on the rise recently reaching all-time highs. However, in comparison to many other European countries, Portugal’s prices are still attractive. Due to the global pandemic, this upward trend seems to be slowing down, though. The real estate market is witnessing lower demand due to the newly introduced measures, since people are not able to travel like they used to, but this trend is likely to change once the crisis is over.

Why invest in rental real estate in Portugal?

Many nationalities are attracted by everything Portugal has to offer. Numerous factors contribute to the strength of Portugal’s real estate market and make this country the perfect place to live or invest.

· As mentioned, Portugal real estate is affordable. The price per m2 for new or renovated properties may be increasing, but still remains well below the European average.

· There is a wide choice of properties to invest in. Thanks to Portugal’s growing popularity among real estate investors, the supply of rental real estate will continue to grow and diversify.

· Short-term/vacation rental provides a high rental income. A dramatic rise of tourism has lead to an increase in rental prices.

· Portuguese legislation protects investors and regulates the fast-growing real estate market. The procedure of acquiring a property is relatively simple and can take only a few weeks. The European Central Bank regulates the exchange rates, inflation and interest rates, which makes financial risks minimal.

· Portugal has an attractive tax system. The Portuguese government has introduced many tax incentives with the aim of attracting investment, making Portugal one of the most vibrant European markets. For instance, there is no wealth tax, no housing tax, and no inheritance tax for spouses and direct heirs. The transfer tax is 1-6%, depending on the property’s value. Plus, there are a number of exemptions on real estate capital gains, especially when reinvesting.

· Portugal is one of the world’s top 5 most secure countries, according to the international institute ’’Global Peace Index’’.

Seasonal or annual rental?

One of the biggest decisions to make when investing in rental properties in Portugal is whether to rent seasonally or annually. This important decision will greatly impact your Return on Investment (ROI) and overall success as a real estate owner.

If you opt for seasonal rental, you can raise rent prices as you see fit when the demand is higher. Moreover, you have the flexibility to use the property yourself (when you’re on vacation, for example). Besides, this is a great first step if you are considering moving to Portugal some day and joining thousands of expats from all over the globe. If you are not quite ready to move permanently, you can start by investing in seasonal rental properties in Portugal. Once you are ready, you can convert your rental into a home, get all the help you might need with international relocation, and start living in Portugal full-time.

On the other hand, year-round rentals usually bring a more constant cash flow. In addition, your tenants will cover utility bills and certain maintenance costs. Moreover, depending on the type of accommodation, you can consider renting it empty or furnished. If you choose the former, you do not have to pay for the furnishings.

Before the global crisis, Portugal saw a rapid expansion of tourism, which made vacation rental highly lucrative. Lisbon and other high-demand destinations whose price per m2 is still much lower than that of London or Paris are particularly profitable. Lisbon and Porto are both good choices for short-term rentals. Depending on the period and the location, you can earn a rental income of 60-130 Euros per night for an apartment in Lisbon and 50-100 Euros per night in Porto. On average, an annual rental for a T2 apartment in the centre of Lisbon is 1500 Euros per month. In downtown Porto, the average is 850 Euros per month.

Where to invest in rental properties in Portugal?

Whether you’re interested in long-term or seasonal rental, a city that is dynamic all year long and popular with tourists is always a wise choice. A notary or a local real estate agent should be able to help you choose the best location. When it comes to Portugal, Lisbon and Porto are the two main tourist destinations and economic centers. In Portugal's seaside region, the Algarve, Albufeira and Faro are the preferred destinations. If you opt for seasonal rental, Lisbon, Faro, and Porto are all good choices thanks to their tourist attractions and international airports. There are more great places to invest in, but whatever the nature of the rental, remember that the location should be active year-round, not only during the summer months.

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