International Real Estate

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Thomas Youngman
  • Rental Property Investor
  • Portugal
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Property Investment in Portugal

Thomas Youngman
  • Rental Property Investor
  • Portugal
Posted Jan 8 2019, 17:57

Hi,

The purpose of this post is to connect with anyone interested/actively investing in the Portuguese Real Estate market. 

I am moving to Portugal in March 2019 and wanted to connect with fellow Property investors. There seems to be an interesting investment case for Portugal currently and by building a supportive network of investors we will be able to discuss opportunities and build our experience faster than if we go it alone

When I arrive in March I will be focusing on learning the market and seeing which strategies will work for me. 

Thanks

Thomas

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Luís Ferreira
  • Rental Property Investor
  • Lisbon, Lisbon
21
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42
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Luís Ferreira
  • Rental Property Investor
  • Lisbon, Lisbon
Replied Jun 23 2019, 04:27
Originally posted by @Rui Dias Costa:
Originally posted by @Riaan Knoetze:

@Rui Dias Costa - Any thoughts on https://www.idealista.pt/en/ ?

I have never used that site. Don't know.

Context:

- My impression of RE agents in Portugal is that they aren't very investor orientated and after trying to comply with your criteria for a few showing they switch to their normal offering (that usually doesn't cashflow and/or make ROI sense).

- I usually use the site I gave you to get a general view of the market and monitor it's evolution (you can tag properties). It has the bonus feature that you can see private offerings and message the sellers directly. Also, many agents relist their properties there and the same property may have more than one agent and different prices.

Full disclosure: I never bought a property from a site or from an agent and I am pretty new at this (with very little real world experience).

Regards, Rui

So true Rui!

My impression is that we have too many people working in this business without understanding the major value that is possible to bring with their service. 
The market has been crazy this decade in Lisbon area, and looks like a lot of agents jumped in just to intermediate a deal and take the commission.

This is a big motivation for me to take the license and work for investors.

My take on the research is:

- idealista has every kind of deals (a lot of wholesalers)

- imovirtual is a mix

- casasapo more down to earth (not so good online platform)

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Luís Ferreira
  • Rental Property Investor
  • Lisbon, Lisbon
21
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42
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Luís Ferreira
  • Rental Property Investor
  • Lisbon, Lisbon
Replied Jun 23 2019, 04:36
Originally posted by @Rui Dias Costa:
Originally posted by @Luís Ferreira:

If anyone is interested to join me to buy a multi-family (“moradia”) or building (“predio”) in Lisbon region, I am currently looking at the market.

Hi Luís,

I am sorry but I am not looking to invest in Lisbon.

Anyway, I do have some interest in that market but I was unable to find a workable deal there since late 2017. Do you have one in mind?

Regards, Rui

Rui, 

Market is high but interest rate is still very low.

A building that allows multiple cash-flows is the goal. 

I have pre-approval financing for 200k€, and i see that i can hardly find properties that can rent for around 1%. 

For 300k€, possible to find some 3-4 units buildings (need investor to put 100k€ and cash 1% monthly).

I intend to live in one of the units (smallest one) at least 2 years and manage to rent the other units.

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Rui Dias Costa
  • Portugal
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36
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Rui Dias Costa
  • Portugal
Replied Jun 23 2019, 06:50

@Luís Ferreira

Interesting strategy. Hope you are able to structure such a deal!

One question! Is your loan structured with fix rate or adjustable?

When I ran the numbers I always considerer a macro change with Euribor increasing to 5%. Today it may seem strange but I was caught of guard when the ECB dumped the rates in the last crisis.

It seems to me that there multiple deflationary trends in the world right now but I don’t see a politically acceptable exit of all the accumulated debt in Europe and Portugal without using inflation. How it will happen, no idea but if they open that bottle and latter they need to hold the genie they will ramp interest rates in a hurry. In that scenario (right now unlikely for the next few years) you may get under water if you didn’t account for it.

I never found a bank that would do fix rate for more than 5 years. If you did I would love to know which one it is. It would help me a lot.

Sorry for them long post.

Regards, Rui

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Rui Dias Costa
  • Portugal
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Rui Dias Costa
  • Portugal
Replied Jun 23 2019, 06:52

@Luís Ferreira

Thank you for the references.

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Luís Ferreira
  • Rental Property Investor
  • Lisbon, Lisbon
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Luís Ferreira
  • Rental Property Investor
  • Lisbon, Lisbon
Replied Jun 23 2019, 11:47

@Rui Dias Costa,

When i buy, my strategy to avoid that to happen is to have a "mixed rate", which is 5 years with fixed rate (prety good deals with BankInter and DeutsheBank) and the rest of the contract variable rate.

During the 5 years with fixed rate i try to get the loan paid down at least until 60% of LTV. When contract is about to reach 5 years, i plan to make some upgrades on the property and ask for re-finance, hopefully pull out some equity and get a fixed rate mortgage.

Let me recommend a backup with emergency fund (equivalent to 24 months operating costs). Together with it, i have a mortgage free apartment that serves as financial security.

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Rui Dias Costa
  • Portugal
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36
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Rui Dias Costa
  • Portugal
Replied Jun 23 2019, 12:05
Originally posted by @Luís Ferreira:

@Rui Dias Costa,

When i buy, my strategy to avoid that to happen is to have a "mixed rate", which is 5 years with fixed rate (prety good deals with BankInter and DeutsheBank) and the rest of the contract variable rate.

During the 5 years with fixed rate i try to get the loan paid down at least until 60% of LTV. When contract is about to reach 5 years, i plan to make some upgrades on the property and ask for re-finance, hopefully pull out some equity and get a fixed rate mortgage.

Let me recommend a backup with emergency fund (equivalent to 24 months operating costs). Together with it, i have a mortgage free apartment that serves as financial security.

 This looks like a nice strategy.

With Crédito Agricola I was able to get a quote for a 5 years fix rate and adjustable after it, a 15 years long loan. It looks like a similar product. I will include those banks on my list. Thank you.

Have you tried your strategy yet? How many deals have you made?

Regards, Rui

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Luís Ferreira
  • Rental Property Investor
  • Lisbon, Lisbon
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42
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Luís Ferreira
  • Rental Property Investor
  • Lisbon, Lisbon
Replied Jun 23 2019, 12:12

@Rui Dias Costa

Yes, made it this January with DeutshBank (now changing to ABanca) when bought a T3 apartment. Worked fantastic with 1% fixed rate for 5 years, and 2,5% for the rest of the contract with variable rate. 

I wish i could had my other deals like that.

Today my portfolio is:

- T2 apartment mortgage free

- T1 apartment with 60% LTV mortgage (variable rate with UCI)

- T3 apartment with 60% LTV mortgage (the one described above)

- 2 stores leasing from CGD

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Rui Dias Costa
  • Portugal
14
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36
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Rui Dias Costa
  • Portugal
Replied Jun 23 2019, 15:15
Originally posted by @Luís Ferreira:

@Rui Dias Costa

Yes, made it this January with DeutshBank (now changing to ABanca) when bought a T3 apartment. Worked fantastic with 1% fixed rate for 5 years, and 2,5% for the rest of the contract with variable rate. 

I wish i could had my other deals like that.

Today my portfolio is:

- T2 apartment mortgage free

- T1 apartment with 60% LTV mortgage (variable rate with UCI)

- T3 apartment with 60% LTV mortgage (the one described above)

- 2 stores leasing from CGD

 That's very good. Congrats!! ;)

Regards, Rui

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Luís Ferreira
  • Rental Property Investor
  • Lisbon, Lisbon
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Luís Ferreira
  • Rental Property Investor
  • Lisbon, Lisbon
Replied Jun 23 2019, 22:42
Originally posted by @Rui Dias Costa:
Originally posted by @Luís Ferreira:

@Rui Dias Costa

Yes, made it this January with DeutshBank (now changing to ABanca) when bought a T3 apartment. Worked fantastic with 1% fixed rate for 5 years, and 2,5% for the rest of the contract with variable rate. 

I wish i could had my other deals like that.

Today my portfolio is:

- T2 apartment mortgage free

- T1 apartment with 60% LTV mortgage (variable rate with UCI)

- T3 apartment with 60% LTV mortgage (the one described above)

- 2 stores leasing from CGD

 That's very good. Congrats!! ;)

Regards, Rui

Can you share your experience?

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Rui Dias Costa
  • Portugal
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Rui Dias Costa
  • Portugal
Replied Jun 24 2019, 06:44
Originally posted by @Luís Ferreira:
Originally posted by @Rui Dias Costa:
Originally posted by @Luís Ferreira:

@Rui Dias Costa

Yes, made it this January with DeutshBank (now changing to ABanca) when bought a T3 apartment. Worked fantastic with 1% fixed rate for 5 years, and 2,5% for the rest of the contract with variable rate. 

I wish i could had my other deals like that.

Today my portfolio is:

- T2 apartment mortgage free

- T1 apartment with 60% LTV mortgage (variable rate with UCI)

- T3 apartment with 60% LTV mortgage (the one described above)

- 2 stores leasing from CGD

 That's very good. Congrats!! ;)

Regards, Rui

Can you share your experience?

Just starting out.  I bought a condo to live using my investment criteria (long and boring story). Still with no real world experience. I have been studying and I am looking to do my first deal.

Regards, Rui

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Replied Jun 25 2019, 12:32

Hello everyone,

Thanks for sharing the links @Rui Dias Costa and thanks for sharing your experience @Luís Ferreira.
This forum post is becoming very interesting indeed.

Regards,

Ângelo Costa

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Rui Dias Costa
  • Portugal
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36
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Rui Dias Costa
  • Portugal
Replied Jul 6 2019, 02:21

@Thomas Youngman

Today's edition of the "Expresso" brings an article about automatic tax exemptions for foreigners in Portugal. Apparently the scope of activities / investments that had this "bonus" increased.

Perhaps it will be of interest to you: 

- Title "RESIDENTES NÃO-HABITUAIS Desconto no IRS alargado a pilotos, trabalhadores do turismo, construção e agricultura" 

https://leitor.expresso.pt/semanario/semanario2436...

Regards, Rui

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Thomas Youngman
  • Rental Property Investor
  • Portugal
37
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23
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Thomas Youngman
  • Rental Property Investor
  • Portugal
Replied Jul 16 2019, 05:20

Hi, 

Thanks Rui for your comments and the link. 

We have just signed the promissory contract on a place in Peniche. I wanted to get that signed so I was talking about what we actually have done and not what I am planning on doing!

I will summarise my learnings to date and share a little about the process/rules I have developed here to hopefully be successful in REI in the Portuguese market. Always happy to have input from others!

Firstly my objectives

•To provide uncorrelated predictable income streams while allowing for the opportunity of capital appreciation

•To provide high % yields. Achieved by buying low value residential housing and turning into high value tourist accommodation for Short Term Let (STL). I won't proceed on a property if I don't believe I can hit a 10% gross yield.

•KISS – Keep it simple stupid

•Low risk as each unit is a small % of investable capital

•Downside protection if properties are purchased in areas where they can be sold as residential homes. 

•Downside protection if properties are purchased requiring improvement to provide a fast increase in capital valuation – improvement means non structural renovations/work. Painting, plastering, refitting out fixtures and fittings, windows and doors.

•Low time requirement for operations – the rental operations can be automated to a large extent maintaining a high hourly return and helping ensure quality control.

Financing 

We have found a mortgage broker who seems to be doing a good job so far. She seems to be able to facilitate mortgages of up to 75% LTV. Rates are <2% and fixing is an option for anything up to 30 years. Affordability is linked just to Salaries, income from the property is not counted.

Legals

Legals where the problems begin! It seems that most of the older houses we have looked at have some kind of legal issue. Some of these issues are resolvable, others seems to be impossible to solve completely requiring work arounds if you still decide to proceed with the property. 

The example I can give is our property in Peniche. It has an annex that is unlicensed/not on the plans. To get it licenced will take from now until at least October at the earliest and no sale is completed until that time. 

In addition even after the building is fully licenced the previously unlicenced annex will always be treated different from the house that was built with a correct licence from the start. Basically if you are selling/buying a house that has been retrospectively licenced then that part for private use is ok, however if officially and practically if you wish to rent the place out on LTR or STR you are not allowed to ever use this space as part of your rental. This may also be because parts of the annex are within 5 meters of the property behind. It must have a door sealing the area off and a sign marking it as private.

By making it licenced the new area can be included by the bank in its estimate of valuation. This leads you to really having to target buyers who are looking for the home as a private home and not selling onto another rental investor. Certainly worth considering in one's exit plans!

Also worth noting that when you see properties that are T2 + 2 for example, that +2 may well not be possible to use for Alojamiento Local / STL. It may well form part of the bank valuation in terms of square foot, and it may be covered in the habitation license (the habitation license would cover house + annex), but it will be treated differently and need to be closed off for rental. Still learning about how it works but this is my understanding today.

We have decided to continue with this deal, due to the location of the property, the fact by licencing the extension and renovating the building we should be able to get a price increase from a buyer as a private home. It is also excellent experience to better understand the market here! We can use the original part of the house for rental as well, which is valuable to help use understand the STR rental market better, ie what income we actually get as all we have current is the airbnb site itself and airdna (an airbnb analytics site).

In short I think the downside is limited, and this deal with give valuable experience while testing my beliefs that it will make me some money!

More generally I think the market here is very interesting. In the UK for example we have a simple LTR model, which works well and is very hands off. I am still trying to find a way to make LTR attractive here in Portugal, but haven't found it yet. Does anyone have any experience of making LTR working here? How have they dealt with problem tenants and what seems to be a challenging legal environment for a landlord? Is it as challenging as it is reported to be or is that just a perception issue?

Market wise it seems that in the central Lisbon and Porto areas yields are pretty low for LTR, if you go to the suburbs there seems to be options here, but I don't have never knowledge in this area yet. 

In terms of STR it seems that in the really strong markets (Lisbon, Porto, old town Ericeira) it is difficult to get the AL licencing. In the outlying areas it does seem possible and that is what we are focusing on. Rural tourism also seems to have potential, but doesn't have LTR back ups if you decide that STR is not feasible for any reason.

Sorry if this has rambled on a bit, but hopefully it is helps people if they are just turning up. I know there are a lot of very experienced investors here in the country who have been successful for a generation or so. It is clearly possible to do well here, but as expats I believe you need to be extremely careful in entering the market. Things that I think are obviously common sense are in fact completely incorrect. I currently know enough to know how little I know!

Luckily I have the help of a good lawyer (@Diogo Capela) who has help guide us through these early days in Portugal. Also our Mortgage broker has been very helpful in understanding how the banks work here. 

In terms of estate agents it seems they focus on a specific area so it is certainly worth building relationships in whatever areas you decide to target. 


Thomas





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Replied Jul 17 2019, 13:44

@Thomas Youngman thank for that detailed report of your experience thus far!

I'm Portuguese, live in Lisbon, new at BP and am a complete noob at this. I consume a lot of REI content online but haven't taken action yet, I'm now looking to understand how RE works in Portugal and how I can make money from it.

I'm available if you guys want to do another meetup and I'm eager to learn!

Regards,

Diogo

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Luís Ferreira
  • Rental Property Investor
  • Lisbon, Lisbon
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42
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Luís Ferreira
  • Rental Property Investor
  • Lisbon, Lisbon
Replied Jul 17 2019, 16:36

Hi Thomas,

Super exciting to read your observations and amazing to have someone as experienced as you to comment REI in Portugal.

All my portfolio (only 5 properties) is LTR, from the beginning (2015). I only have good words about it, and cash flow is always over 100€/month per property. But none of the properties are located on city center, but inside a 30km range from city center, in my case, Lisbon.

Would love to get with you guys together.

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AJ Singh
  • Rental Property Investor
  • Orange County, CA
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468
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AJ Singh
  • Rental Property Investor
  • Orange County, CA
Replied Jul 19 2019, 19:54

@Thomas Youngman

Thank you for such a detailed response. Please keep posting about your RE journey. 

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Rafael Franco
  • Batangas, Calabarzon
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Rafael Franco
  • Batangas, Calabarzon
Replied Jul 28 2019, 04:44

Hi guys,

I’m Portuguese and I live in Porto.
Two years ago I made my first investment: a T3 apartment that I had to rehab and which I’m currently “house hacking”. I share it with two colleagues who pay me rent, which covers all my expenses and still generate around 60€ cash flow every month.

Looking back, probably I could have made things differently, but it has been an amazing experience so far. I’m now aiming to my second deal, but the market seems crazy right now!

It's great to see this REI community growing, and I'm looking forward to learn from you and also share my experiences with you!

Regards,
Rafael

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Luís Ferreira
  • Rental Property Investor
  • Lisbon, Lisbon
21
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42
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Luís Ferreira
  • Rental Property Investor
  • Lisbon, Lisbon
Replied Jul 28 2019, 07:42

@Rafael Franco welcome to this topic!

Super happy to see the community growing.

Right now I am in process to buy a duplex in S. Domingos de Rana (Oeiras), and totally agree with you about the market.

Lisboa and Porto are pretty similar when it comes to property value. I started investing in 2015 and until now acquired 5 doors, 3 of them in 2019, so my perspective is to keep growing portfolio whatever the market is.

Simple because I am buying and holding, and as long as you have a deal that make numbers work together, you will succeed. Also, for the simple reason that financing is still cheap, so, since my portfolio is still small, I am “buying” inside a “selling market”.

Imagine you getting another apartment to house hack, or a multifamily in reasonable condition, ready to move in, and rent the room that you are living?

Wouldn’t that be a step forward?

Good luck and keep us posted!

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Replied Jul 29 2019, 01:13

Welcome @Rafael Franco and thanks for sharing your experience :)

Good luck @Luís Ferreira with your duplex purchase. Let us know how it goes.

Right now i'm also working on searching for RE in Cascais, Estoril, Lisbon areas, and building up relations with real estate agencies. Also searching on idealista website which is a great one to start with.

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Bernardo Bento
  • Real Estate Agent
10
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9
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Bernardo Bento
  • Real Estate Agent
Replied Aug 8 2019, 02:00

Hello everyone,

It's funny how I was just surfing google on my vacations, came across all theses messages from you guys and thought that I could actually provide you with some good info about the Portuguese market. I quickly signed up and here I am. So a brief summary about myself:

my name is Bernardo Bento and I'm a real estate agent in Portugal, mostly focused around Lisbon, but I can help all around the country. I've always liked real estate (I actually have family with long connections to construction) and after reading a lot about real estate investing, I decided to start working as an agent in order to get the most firsthand experience possible, so when my time comes -first investment deal- I'll be more than ready and acknowledged in this market. I'm also a marketer, so I understand how business works and really try to provide the maximum value to the people that get in touch with me. I'm a firm believer that we can't ask for anything without giving A LOT first. I really try to stand out from the remaining agents that only seem to care about their gut and their money being made, whereas I care about the service I'm providing. Money is a side effect. Also, as I love REI I try to focus on that as well and would love to work with some investors in order to share knowledge and learn from each other.

Also, I try to provide free content to my followers on my social networks about real estate, but it's everything in Portuguese though... shame :/ 

Feel free to ask whatever, if I can help, I will. No BS around here :)

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Thomas Youngman
  • Rental Property Investor
  • Portugal
37
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23
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Thomas Youngman
  • Rental Property Investor
  • Portugal
Replied Aug 8 2019, 06:29

Hi, 

A few questions to the group if you don't mind:)

1) Meet up - I am up in Porto in the second half of August if anyone fancies doing a meet up? 

2) Accountant - Has anyone found a decent accountant with knowledge of REI here in Portugal? Specifically I am trying to figure out the best vehicle through which to conduct our REI. I expect a company makes most sense, which leads onto my next question.

3) Commercial Mortgages - Has anyone made the jump from getting financing based on personal salary to financing based on the cash flow from the deal itself? For a number of reasons we are going to need to make that jump fairly soon, so if anyone has made the move already I would be very happy to buy them lunch in exchange for their thoughts! 

So far my research has only introduced me to brokers focused on personal mortgages based on salary. 

4) International tax advisors - Has anyone worked with an international tax advisor that they could recommend? We are trying to bring money into Portugal in the most tax efficient and legal manner possible. 

Thanks!

Thomas

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Rui Dias Costa
  • Portugal
14
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36
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Rui Dias Costa
  • Portugal
Replied Aug 8 2019, 17:32
Originally posted by @Thomas Youngman:

Hi, 

A few questions to the group if you don't mind:)

1) Meet up - I am up in Porto in the second half of August if anyone fancies doing a meet up? 

2) Accountant - Has anyone found a decent accountant with knowledge of REI here in Portugal? Specifically I am trying to figure out the best vehicle through which to conduct our REI. I expect a company makes most sense, which leads onto my next question.

3) Commercial Mortgages - Has anyone made the jump from getting financing based on personal salary to financing based on the cash flow from the deal itself? For a number of reasons we are going to need to make that jump fairly soon, so if anyone has made the move already I would be very happy to buy them lunch in exchange for their thoughts! 

So far my research has only introduced me to brokers focused on personal mortgages based on salary. 

4) International tax advisors - Has anyone worked with an international tax advisor that they could recommend? We are trying to bring money into Portugal in the most tax efficient and legal manner possible. 

Thanks!

Thomas

Hi,

1) Oporto is really out of my way. Hope you get a good meet up. 

2 and 3) See pm.

4) No idea.

Regards, Rui

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Replied Aug 13 2019, 06:12

@Thomas Youngman - I've asked some contacts that I know and will keep you posted on what I find...

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Joe Crupi
  • Rental Property Investor
17
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103
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Joe Crupi
  • Rental Property Investor
Replied Aug 14 2019, 18:22

@Bernardo Bento

I was curious what it looks like to invest in Portugal for foreigners. Is it advantageous, or is it difficult and anti-foreigner with extra stamp duty and such?

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Bernardo Bento
  • Real Estate Agent
10
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9
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Bernardo Bento
  • Real Estate Agent
Replied Aug 15 2019, 03:12

Hello @Joe Crupi, nice to meet you. There are no restrictions on foreign property ownership in Portugal and transaction costs are generally low.

Portugal will grant a 5-year residency permit to non-EU citizens through Real estate investment (the program is called Golden Visas, look it up). The permit allows holders to work or study, as well as to travel in Schengen countries. You can apply for permanent residency after five years. I would say rental yields are now between 4-6% in Lisbon and it’s property market is now reasonably priced. Tourist interest in the centre of Lisbon is enormous, so the option of letting via Airbnb is a viable one though they aren’t giving more licenses in these areas. Short-term rentals may earn higher returns. Capital gains realized by nonresidents on the sale of Portuguese property are taxed at a flat rate of 28%. For capital gains realized from fixed assets such as real property, only 50% of the capital gains will be taxable if the capital gains are reinvested in fixed assets such as real property during the year the sale occurred, the previous year, or within two years after the sale.