How to buy property in Portugal as a foreigner
If you’re decided to invest money into overseas property, surely think about Portugal – easy residence, tax benefits and lower prices.
Owning a holiday home is a wonderful dream - but it can also turn into a nightmare. If you're not there often enough to trim the grass, pay the bills, or check the boiler, you could have a nasty surprise waiting for you next time you visit. Even if the worst doesn't happen, you could lose a few nights' sleep worrying - have the pipes burst? Have tiles blown off the roof? Has the garden become a jungle?
A good property management firm is the answer to these problems. Fortunately, Portugal has quite a well developed market for property management, at least in the main tourist areas - the Algarve, Porto, Cascais and Lisbon; with rural properties outside these areas, you may find there's much less choice. Many firms are English-speaking, which could make your life much easier. In Lisbon and Porto, tourist hotspots, there are even managers specialising in AirBNB rentals, which can improve the returns on your property significantly compared to longer lets; the best of them even run discount schemes that are available for your guests, as well as running the property.
Some resorts have their own management teams; for instance, Quinta do Lago will manage any property on the resort. That helps with marketing, and ensures your property is maintained to the same standard as other homes in Quinta do Lago. (A second opinion on your furnishing choices and décor is one of the lesser known advantages of having a good property manager.)
Where to search a property? What's the total price of buying? What about communication? And how not to be fooled? We've got you covered in the guide.
One thing you'll need to rent your property out short term is an AL (Alojamento Local) licence (makes approximately 10% of one month rent). It's not particularly difficult to get, but the process can be time-consuming and, of course, all the application forms are in Portuguese. This is the first thing you can ask a property management company to do for you - any good manager should be able to get the wheels turning and your licence in place, saving you the hassle.
Property managers will help you market the property. Some have their own websites - particularly resort-based managers who may have a website promoting both sales and rentals at the resort - while others use platforms such as AirBNB or Booking.com. Most will take photographs, write up the particulars, and suggest a competitive rental level that will minimise vacancies.
And, of course, they'll manage the admin - collecting mail, paying the bills - and maintenance of the property. Some even offer a concierge service covering such services as providing extra beds or cots, airport transfers, and so on.
Naturally, this all comes at a cost, and that's fairly high; most property managers in Portugal will charge you 20% of your rent, and you'll need to add 6% VAT to that bill. In fact, you'll only get about half your rent paid over to you, because 25% of rental income also has to be paid over to the government as tax, when it's received. Non-resident owners should be able to reclaim this in their annual tax return; one property manager says its clients get back 80% of everything that's been paid.
Choosing a good property manager is vital. If they have NALLE (National Association of Local Lodging Establishments) or AIPP (Association of International Property Professionals) membership, that's a good sign, but you need to interview them, get references, and check their web sites to do your basic due diligence. Ask to be put in touch with happy clients, and remember to check they are up to date on tourism laws and new developments in the area.
Of course, you could manage your property yourself. Plenty of people do so, mainly those who arrange one longer term let of say three months over the summer, and use the property in the shoulder period themselves. But a property manager takes a great deal of the hassle out of owning a Portuguese holiday home - so balance the cost against what self-management takes out of your time and energy.