Why Buy an Investment Property in the Algarve?

Editorial Lifestyle

Explore the potential benefits with Abacoz Properties

Abacoz Properties explains why buying an investment property in the Portugal, specifically in the Algarve, makes sense. Good rental yields, strong tourism and a stable and peaceful society are some of the factors.

Property in the Algarve is generally recognized as being a sound investment. The country has experience growth in tourism and the property market in recent years. There are tax incentives to attract retirees to the Algarve and various incentives to support investment in property. 

In the article below the experts from Abacoz Properties explore some of the reasons to invest in property in the Algarve. Abacoz Properties is an independent real estate agency located in Lagos. Very knowledgeable of their market and skilled in negotiation, they help buyers and sellers sucessfully conclude their transaction.
 

Why Buy An Investment Property In The Algarve?
 
The Algarve region is a popular choice for a holiday home and also offers an excellent property investment opportunity. With plenty of low cost airlines offering flights to Algarve's Faro International Airport, and flight times of just a few hours from most of Western Europe, the Algarve is easily accessible.

There are many competitive factors for choosing the Algarve for your real estate investment. There are the obvious benefits of the climate, the award winning beaches and the fabulous food and wines, but in addition to these positive elements, owning property in Portugal can provide a solid financial investment.

With more and more tourists visiting Portugal each year, renting your Portuguese property to cover the annual costs of owning a holiday home is an attractive option.

Voted in the top three most peaceful countries in the world 2019, Portugal has one of the lowest population to land densities in Europe. The strict planning regulations secure the natural beauty of the sandy beaches, open countryside and forests. This in turn limits the supply of new properties, keeping the demand of property for sale high! 
Politically, Portugal is stable. With one of the lowest crime rates in Europe and the capital, Lisbon, recently voted the safest in Europe there is an increasing demand for properties and rentals, both short and long term.
 
In comparison to property prices in other European countries such as the UK, Ireland, Spain and France, property in Portugal is still very affordable. Good quality properties at low prices means good rental returns. Rental yield on average still remains one of the highest in Europe, statistics show that gross rental income in Portugal ranges from 5% to 7%.
 
Portugal also offers some excellent tax advantages. The Portuguese Golden Visa or 'Resident Permit for Investment' is a fast-track method for non-EU members and their family members to obtain Residency Permits in Portugal, with no direct tax implications/obligations for income generated outside Portugal. See more details about Golden Visa in Portugal
There is also the Non-Habitual Tax Regime (NHR) in Portugal, offering a decade of generous tax exemption.
 
Tax regulations can be complicated and are frequently changing, so we suggest discussing your own personal financial situation with your Portuguese accountant, and with a reputable International Financial Advisor.
 
 
COSTS INVOLVED

When you purchase a property in Portugal, as with any other country in the world, there are ongoing costs and taxes to pay. Find out more about the costs of buying property in Portugal.
In addition, especially if you are planning to rent out your holiday home in the Algarve, there will be some maintenance costs involved. If you are not able to manage and maintain your property investment yourself, it will be important to have it well cared for all year round on your behalf. This ensures that your home is in top condition for tenants/guests, plus when the time comes to sell your property it maximises the likelihood of the best valuation possible.

You may wish to work with a property management company to manage your bookings/tenants, pay utility bills and taxes, supervise maintenance works such as pool cleaning and gardening, and to generally ensure the property is always in a good condition.
 

RENTAL INCOME

The income you can expect will depend on the type and quality of property you offer, its location and where holiday lets are concerned, the season. 
 
Where short term holiday rentals are concerned, on a weekly basis and during peak season (June to September), on average you can expect between €500 and €1500 for a two bedroom apartment, depending on its location, if it has a sea view or luxury facilities etc.
A larger property such as a four bedroom villa with private swimming pool can generally be rented out for between €1500 and €4000 per week, again dependant on location and facilities.
Out of peak season, short term holiday rental charges are lower, as a guide 25% to 50% lower than the Summer months.
 
PLEASE NOTE: If you rent property to tourists in Portugal, you must arrange an Alojamento Local licence. There are various requirements including compliance with safety requirements, registration of floorplans with the local council (camara), and the installation of legal signage and first aid equipment. The process is straight forward, but can be time consuming getting the relevant paperwork in place and signed off to obtain the license.
 
An annual/long term rental in the Algarve can bring anything from €400 per month for a standard one bedroom apartment, to a tremendous €10,000 per month for a luxury villa in a prestigious location.
Income information sourced from https://www.idealista.pt
 

PROPERTY RENTAL TAXES

When renting out Portuguese property, the income is always taxable in Portugal, regardless of residency. It's important to understand these tax implications.
 
As of January 2020, for non-residents, tax on LONG TERM rental income is set at 28%, although property maintenance, repair expenses and IMI (property tax) may be deducted.
A non-resident that rents out a property SHORT TERM (holiday let), pays 28% tax over only 35% of the income. The remaining 65% of the income is tax free.
 
For those who are resident in Portugal, your rental income on LONG TERM rentals has a flat tax rate of 28% on income, after expenses have been deducted. Alternatively, you can choose to add rental income to your other income for the year and pay tax at your normal scale rates. However, with rates up to 48%, this option only benefits those within the lowest (14.5%) tax rate band. 
A Portuguese resident that rents out their property SHORT TERM (holiday let), pays 28% tax over only 35% of the income. The remaining 65% of the income is tax free.
 
Abacoz Algarve can you help you throughout your investment property purchasing process, from buying the right property to rental management.
Contact Abacoz Properties at https://www.abacoz-properties.com/, email info@abacoz-properties.com, or call +351 282 044 886.