Should I Invest in a Property in Portugal?

Investing in an overseas property is an incredibly exciting prospect, but should you be considering Portugal as a destination for your venture? Let’s find out…

If you’re considering investing in an overseas property, then you will no doubt have a list of potential countries on your radar. Spain, Greece and Italy are just some that immediately spring to mind. But what about Portugal?

Sitting pretty in southwestern Europe, Portugal has experienced a property boom over the past few years. The rapid growth of tourism in the country has made the prospect of an investment incredibly attractive. But, before you go consulting an English-speaking Portuguese lawyer about your imminent investment, you need to take some time to consider whether a property in Portugal is right for you.

This post will guide you through everything you need to know when investing in a property, and the reasons why Portugal is (or isn’t!) the right country for you. We’ll then provide any extra tips you need to know when you come to make your final decision…

Why Should I Invest in Property?

If you’ve never invested in property before, it can seem a little daunting. Afterall, it’s a huge undertaking and will require some significant capital. That being said, there are a number of reasons why you should consider this realm of passive income:

You’re the Boss!

If you invest in a property, you can decide exactly what you want to do with it. Your options really are endless – you can rent it out on a short-term or long-term basis, and map out exactly how much you want to charge for rent. You can even save it for your retirement; it’s entirely up to you.

You Can Use it as Additional Revenue

If you’re looking for a handy way to secure an additional revenue stream, then look no further. Investing in property allows you to secure some extra funds, both through the cash flow you gather every month through rent, as well as capital appreciation (the increase in the value of the property). Neat, huh?

Instant Gains

If you’re able to pull off a few nifty manoeuvres, then you may be able to make an instant gain on your investment. There’s no guarantee on this, however, so make sure you do your research before you get caught out.

Why is Portugal a Good Place to Invest in Property?

So, now you know why investing a property is a great idea, why should you be considering doing so in Portugal? Well, there are countless reasons why a property in Portugal is the way to go, so let’s take a closer look.

A Growing Real Estate Market

The past few years has seen Portugal become one of the most popular destinations for real estate investors, which tells you a lot. Much of that may be down to the meteoric rise of the capital Lisbon, which was ranked as the most interesting European city to invest in real estate by PwC.

Naturally, that ranking is also having an effect on other major cities in the country. So, if ever there was a time to invest in a property in Portugal, it’s now.

Cheap Compared to the Rest of Europe

The average price of real estate in Portugal per metre squared is well below the rest of Europe. This makes it one of the cheapest destinations for investments around. Prices are slowly on the rise, so time is of the essence!

Favourable Tax Rates

As the saying goes: there are only two certainties in life – death and taxes. While that may be a little dramatic, the reality is that taxes do need to be paid when you invest in a property in Portugal. On the brighter side, Portugal has a very attractive tax system, with plenty of incentives on offer to encourage new investors.

High Seasonal Rental Income

If you’re investing in a Portuguese property with the intention of renting it out to holiday makers, then you’re in luck. The growing levels of tourism in the country go hand in hand with an increase in rental prices, meaning you’ll be making a return on your investment before you know it.

Your Investment is Protected

If you’re worried about making sure your investment is protected, then fear not! Portugal has a number of legislations in place that protect buyers and help to regulate the market, meaning financial risks are greatly reduced.

Portugal is Beautiful!

What’s better than investing in property? Investing in property in a country as beautiful as Portugal! There are plenty of breath taking cities and coastal regions to consider, so choosing where you want to buy may prove to be a nice problem!

Why Might Portugal be a Bad Place to Invest in Property?

Investing in a property in Portugal isn’t without its risks. There are a number of things you should keep in mind before you take the plunge, so make sure to pay attention to the following.

Unfamiliar Legislation

While Portuguese legislation is forgiving to investors, it will still appear unfamiliar if you haven’t invested in property in Portugal before. There will also be plenty of documents to sign and, if you don’t speak Portuguese, you’ll definitely need some help to get your head around them.

Selling Your Property is Not Always Straightforward

If you are investing in a property in Portugal with the intention of selling it for profit, there are a number of potential pitfalls. If you are not a Portuguese resident, you will need to pay a fixed rate of 28 percent capital gains tax when selling a property. You’ll also may need to pay estate agent costs, who could charge around three to five percent of the property’s value.

You May Need a Translator

While English is widely spoke around Europe, don’t think you’ll be able to get away with conducting an entire property transaction without knowing some Portuguese! If you’re eyeing up an investment, consider learning some Portuguese, because you may need to use a translator to guide you through the process, which will be an extra source of expenditure.

General Tips to Consider Before Buying a Portugal Property

So, now you’re clued up everything you need to know about investing in a property in Portugal, you’re ready to go, right? Not just yet! If you’ve never invested in a property before, there are a several tips you’ll need to keep in mind so that you can make the best possible decision.

Research the Market

It’s always worthwhile taking some time to research the current property market to get a better idea about the value of certain properties and the average rent prices for different areas. By doing some frugal research, you might find that there are a few hidden gems in Portugal that you hadn’t previously considered.

Take Your Time

Don’t go rushing into anything! No matter how a good a deal you think you might have landed on, you should never go rushing into anything without properly considering all of your options.

Approach with Caution

If something seems too good to be true, it usually is. If a property springs up and seems far too cheap for what’s on offer, there may be a reason for that, so don’t be tempted to fall into any traps.

Get in Touch with a Property Lawyer

Whenever you make the decision to invest in a property, it’s always wise to consult the advice of a specialist property lawyer. They can guide you through the entire process and make sure that you are fully protected against any potential problems.

It’s especially useful to contact a property lawyer who has specialist expertise in Portuguese law, so they will know every legislation and law back to front.

Are you Investing in a Property in Portugal?

Hopefully this guide has given you a closer insight into Portuguese property investments and why it may be the right choice for you.

Have you invested in a property in Portugal, or even anywhere else in Europe, for that matter? Feel free to leave a comment with your own piece of advice for budding investors below.