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Income property in the Algarve

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Posts: 79
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Topic starter
(@jordan_zimmerman)
Trusted Member
Joined: 11 months ago

Hi Folks,

 

Any advice or experience about buying income property in the Algarve? We will live in our new home in Azeitão but are considering income property in the Algarve with the idea that we could use it a few times a year for ourselves. Obviously, we're not the first people to have done this so maybe we're fooling ourselves that it could be financially sound.

 

Would buying in one of the full-featured resorts be a better (or worse) investment? I was thinking it might be easier to get short term rentals in those resorts (and the resorts do all the management usually). 

 

Anyway, any thoughts or concerns would be appreciated.

14 Replies




Posts: 182
Community Member
(@aspidistra)
Estimable Member
Joined: 3 months ago

Hi, I am buying a place in the Algarve, not in a resort, and hoping to do summer holiday rentals with it. But it may also be my home at some point so not just an investment.

There is so much accommodation in the Algarve I wonder if the area is saturated for investment but they keep building more.

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Posts: 40
Premium Member
(@emergentt)
Eminent Member
Joined: 6 months ago

Great question!

We’ve been doing our ‘scouting trip’ in Portugal for the last few weeks. We are currently in the Algarve and have been seeing some properties…

One thing that would be GREAT is if a property management company would be available to do rental projections based on location and size. (We will like be out of the country in August each year, for example.) 

For instance, in the Tahoe region of California during the high season (Winter and Summer) you could plan to be rented 80% of the time but only 20% in the Spring and Fall. Also a tax implication analysis would also be helpful. Not really planning on making a profit, just hoping to offset some costs…

food for thought…. Gene

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Posts: 182
Community Member
(@aspidistra)
Estimable Member
Joined: 3 months ago

The problem is, would you trust a property management company to do a forecast for you, when presumably they would be hoping for you to engage them? They might be over optimistic in their analysis.

I think most property management companies can give you a ballpark figure on what to expect as rental income at different times of year, I have been told very similar figures by different companies but that is for a specific property.

However due to the covid crisis it is anybody’s guess what capacity you might get. The Algarve tourist board does some general analysis of capacity per month, so for example they can tell you accommodation was 70 per cent at capacity August 21.

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Premium Member
(@emergentt)
Joined: 6 months ago

Eminent Member
Posts: 40

@aspidistra Absolutely. I would take any recommendation and then guesstimate a fraction of their estimates. Probably 75% ish… assuming they would want your business. The rest of the analysis… their admin fees, the amount of fees that can go towards insurance, utilities, mortgage interest, etc. would be of interest to me as well… in the US it is only the % of rental nights compared with the “personal” nights per year. I would assume it is the same over here. But assumptions are just that, assumptions. I am going to speak with a tax consultant soon about NHR issues etc so I guess I’ll ask them then. Just curious if those questions have already been answered…

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Community Member
(@martin)
Joined: 16 years ago

Noble Member
Posts: 2488

@aspidistra 

my experience is you will have bookings from mid June till mid September

anyone who wants to come say mid winter (never had one!) take great care that if they put on electric heaters it will cost  you more than the rent you earn

 

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Posts: 2488
Community Member
(@martin)
Noble Member
Joined: 16 years ago

You might want to update and check the latest on this - if you want to rent to holiday makers

AL- Holiday Rental Licence procedure explained by afpop (algarvedailynews.com)

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2 Replies
Premium Member
(@jordan_zimmerman)
Joined: 11 months ago

Trusted Member
Posts: 79

@martin yeah - the legal aspect is why buying an apartment in a resort development seemed more attractive. You pay a premium but the resort handles all the legal headaches.

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Community Member
(@martin)
Joined: 16 years ago

Noble Member
Posts: 2488

@jordan_zimmerman 

 

Just take care, and I know that many have found this that by the time you have paid for the agents, maids, pool man etc and then get the income rental money - there is not much left

knew one German couple who rented their villa for an entire  season and found that they were in debt to the villa rental agency for all the "expenses" 

I recall the german man saying we are paying for other peoples holidays - they then never rented again

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