Please feel free to view our Forum, but you must either LOGIN or REGISTER to join in the conversation.
Few niche questions re: real estate investing in PT
I work on the private equity/private debt side of real estate here in the States and figured I'd see if anyone has had any exposure to that in their real estate-related activities in Portugal. The U.S. real estate market is certainly different from almost any other across the world, though I feel like, barring any regulation that would hamper it, there would still be a need for these financing layers for investors looking to add value via renovation or create value via new construction.
I know I'll probably be able to answer a lot of these better once I'm immersed in things in Portugal, but if anyone has some insight into the below, I'd super appreciate having a chat.
- Does "hard money" exist in Portugal? Hard money loans are essentially very high-interest, short term loans with very low qualification barriers leveraged frequently by flippers.
- Does "private money" exist. in Portugal? Private money was essentially created when institutions realized that they could do what hard money was doing at less interest, but still more interest than typical banks and without the mortgage qualification barriers.
Essentially, are there any institutions and/or lenders in Portugal who lend at higher interest rates than the banks, who base their lending decisions primarily on the opportunity (ie. resale potential) of a property rather than the borrower?
- Is joint-venture common in Portugal? In real estate here in the states, "syndication" is fairly common. You'll have a "sponsor" of the project who is the main person responsible for executing the project, and several "passive" participants who contributed toward equity and cost. They'll split proceeds at the end.
I've found that banks do offer rehab 'mortgages' - you can typically do 90% rehab financing if you already own the property outright, or 70% of prop + rehab combined, with principal payments being deferred for two years. So there's that. But for reference, private lenders here are lending sometimes up to 90% LTC @ 8% interest.
I know these are niche, but perhaps someone has some insight as to how things work over there.
I'd also be happy to talk to anyone interested in learning more about this side of real estate investing, if you have such a curiosity. 😀
You are going to find Portugal quite a bit different then the US. Maybe we both can get educated in the process but here is what I know.
I am not currently aware of any hard money or private money lending as we had in the US.
We are following an effort for a something along the lines of a joint venture here. Check out the entire series on this.
Yes, banks here do offer rehab mortgages, but it is more nuanced than the states. I think it was addressed in this link.
Do share anything you find but it seems like the banks here are quite a bit more risk averse then the US.
One wrinkle in the JV I think is that you can only get a mortgage for ~50% purchase if I remember correctly. So that increases your equity raise.
That is a big wrinkle that we found. The equity required to play ball makes the deals less attractive. You have to also consider the project timelines here. They are quadruple or more of a project in the US. Thus, eating into profit.
The content I sent you links to also addresses the timelines for completing a project in Lisbon versus Porto. Lisbon takes almost twice the time which really requires some long-term decent funding.