You probably are mad if you are buying a new villa from a developer in the current climate.Do you think we are mad? Should we keep it in cash instead? We have small kids and so we know we would get alot of use over the years and as interest rates on saving are so bad, would we be as well to put it away in property abroad?
The property market has not decreased much there in comparison to here?
Any advice?
Emmage
I don't want to dampen your spirit but from Google Earth Alma Verde really is in the middle of nowhere, you still have to get into your car and drive to Burgau for your nearest village, Lagos is quite a distance. You would be on your own with the kids in June cause most schools are still open & parents would not go until end of school year. Its very isolated and for that money you could get yourself a villa in Lagos, on the beach, near shops. Palmela where we invested in Central Portugal in 2006 is still not finished, just as you describe huge complex, on the forum one woman & her kids were the only people there for their holiday. It was to have a 4star hotel etc. but its been shelved. It was supposed to be eco this & that etc. but it looks now it will be 2013 so people are told before its finished. Alma Verde will not get off the ground for a long time. That's hugh money for that part of Portugal, bet the locals would pay a third of that. I'm sorry but rentals are way out of line, people will not pay when property is not near beach. DONT DO IT. It just doesn't add up. Too expensive. Good luck.
Keep a cool head. Separate the finances from the dream. The agents will try to sell you the dream. You can still have the dream without the agents.
Now you said that house would cost 1800 / week peak season. You'll be really lucky to get 6 weeks at that rate during the school holidays and another 13 weeks at half that rate IMVHO unless someone can prove to you otherwise by showing you audited book keeping over a long period. (Bear in mind you've pre-booked 5 weeks of high season rental for your own use so you get no income from that.) That'd be an annual rental income of around 22.5K before tax and costs best case. The agent takes 8000 costs straight of the bat = 14K5. Then property and income taxes, insurance, accountants etc and you'll be looking at a lot less. Not even taking into account the possibility of capital depreciation, maintenance etc. etc. It'll possibly work out just about break even if the experiences of a friend of mine are anything to go by, and potentially a lot worse.
The alternative is to rent your dream villa every year and also possibly in different locations.
That'd cost you 1800*5 = 9000 euros.
if you want dream storage, you can rent the storage too..... you don't need to buy a house to get storage. There's rental lock up storage in Lagos http://www.u-store-portugal.com/ Or you could do a deal with the concierge or a neighbour. That sure ain't gonna cost you another 1000. So the very best you could hope for is to save 10K tops on holiday costs.
If you're really afraid about banks falling over, then spread your deposits around banks and over multiple accounts so that you are covered by government deposit protection schemes. You can currently get 4 - 4.5% quite easily on long term cash 5 year term deposits in Euros at zero risk. Even from a triple A rated bank like the Rabobank with 100% government guarantees on the first 100K. See [broken link removed] Don't believe the doom and gloom about financial markets and banks failing. If you're sensible you can protect yourself and your savings and still earn decent real returns considering that inflation is non existent. No private individual has yet lost money on protected deposit accounts due to bank failures. Not even in the US.
So on 580K worst case investment scenario on a pure cash deposit @ around 4% that would be around 23K2 cash minus 25% DIRT tax minus your 10K for your holiday and you're still 7.4K up on the deal at near zero risk and zero work. Of course you could potentially earn more on your investments by taking slightly more risk, and I'm not suggesting by any means that you should keep everything in cash, but this just illustrates probably the worst case for renting, which is still almost certainly better than the best case of owning the villa in your situation.
It just doesn't stack up unless you can get a place for half the price, or you assume completely irrational amounts of rental income, or you can get a whole load more out of season personal use [but even then, out of season rentals in resorts cost a pittance].
Disclaimer: I don't work for the Rabobank, but I am a business and personal customer, and I do have a large amount of cash on deposit with them (because of their AAA rating).
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