Property Purchase in Portugal

B

Barbara Bunter

Registered User
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24
Hi,

We're looking at purchasing a holiday home in Portugal.

Any thoughts or recommendations in terms of estate agents, banks, mortgage brokers, lawyers, etc would really be appreciated.

Thank you in advance.

B

EDIT: In the Algarve I should have specified.
 
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Are you going to live in the property for a substantial amount of time and have you the money to buy it? Just spotted you want to know about lenders. Ok, if you're going to live in it that's fine, but if you aren't, what's the purpose of buying it?
 
noproblem said:
Are you going to live in the property for a substantial amount of time and have you the money to buy it? Just spotted you want to know about lenders. Ok, if you're going to live in it that's fine, but if you aren't, what's the purpose of buying it?
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"No" and "Probably".

We spend three weeks a year there in the summer which is now costing a lot to rent. We plan to retire in Portugal and would use it for long weekends here and there as well.
 
noproblem said:
It costs quite a bit of money to have a house/apartment in the sun. You might be very surprised at how much. I certainly wouldn't borrow money to have one.
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Yes, we're looking into all of that. The aim is to avoid developments with crazy service charges.
 
Barbara Bunter said:
Yes, we're looking into all of that. The aim is to avoid developments with crazy service charges.
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There'll be management fees, insurance, bank account, electricity bills, water bills, wi-fi connection, municipality charges, etc. Furnish and fit out the place. Install A/C if not supplied. You'll need to know or have a contact no for a handyman/woman for painting, diy, fixing and mending all sorts. If renting, you'll need someone to get renters, give and collect keys, do laundry, supply bed linen, check for damage, money transfer, etc. Leaks and things going wrong, etc, etc, etc. That's only for starters and before you set a foot in the place.
 
noproblem said:
There'll be management fees, insurance, bank account, electricity bills, water bills, wi-fi connection, municipality charges, etc.
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There will be also at least 300 days of sun, quality wine direct from the vineyards at €3.50 a bottle, dinners out for 2 (including vino) for €20, cheaper heating bills, cheaper electricity (some days Portugal gets 100% electricity from wind/solar), coffee shops at 80 cent a cup, great healthcare, 5G wifi, use your Netflix account from home etc
 
Thanks for those comments. We don't plan to rent it out...this will be a home for us in the longer term...we're just accelerating the purchase because we can probably afford it now with borrowings, and all things being equal prices of property assets tend to rise over time, albeit they can have periods when they don't! The plan would be to avoid management fees as we won't be renting it out and we will try to avoid complexes/developments.
 
Just to mention that you are going to buy a property abroad that you will likely use for 30-40 days a year max with the other 320 empty while the meter (literally) is running on utilities, service charges etc. that are increasing exponentially and which you possibly can't afford as you are borrowing and at the same time that interest rates will likely rise significantly over the next while.

I think you should reconsider.

Your three weeks to rent in summer is a small, small fraction of your total outlay of this project. How many 'three weeks' would you get for just one year of interest charges, utility charges, maintenance etc?
 
tallpaul said:
Your three weeks to rent in summer is a small, small fraction of your total outlay of this project. How many 'three weeks' would you get for just one year of interest charges, utility charges, maintenance etc?
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Exactly that! For similar money you could rent a nice house / villa in lots of nice places for many years with none of the headaches of property ownership abroad.
 
Barbara Bunter said:
The plan would be to avoid management fees as we won't be renting it out and we will try to avoid complexes/developments.
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Have you priced insurance for largely vacant property there? Here they can insist you shut off services, drain water tanks, etc.. Do similar rules apply? Who's going to maintain gardens?

When do you plan to retire?
 
Have you compared the cost of spending a few weeks a year for the next, say, few decades, on holiday there (with flexibility on where you stay and not being tied to one location) against the likely up front and ongoing costs of buying (not to mention possible tax issues etc.)? I realise that this doesn't take into account the living abroad in retirement issue but it could still be a useful exercise.
 
ClubMan said:
Have you compared the cost of spending a few weeks a year for the next, say, few decades, on holiday there (with flexibility on where you stay and not being tied to one location) against the likely up front and ongoing costs of buying (not to mention possible tax issues etc.)? I realise that this doesn't take into account the living abroad in retirement issue but it could still be a useful exercise.
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Yes we've been looking at that. We're spending €24,000 a year on holiday rentals. Mortgage rates seem to be around 3.5% in Portugal at the moment(!). We're hoping to borrow €700,000 over 30 years with a deposit of €300,000 which seems to be possible as the banks advertise that they'll go to age 75 and we're in our early 40s. So really crudely that's €24,000 in interest per year.
 
Barbara Bunter said:
Yes we've been looking at that. We're spending €24,000 a year on holiday rentals. Mortgage rates seem to be around 3.5% in Portugal at the moment(!). We're hoping to borrow €700,000 over 30 years with a deposit of €300,000 which seems to be possible as the banks advertise that they'll go to age 75 and we're in our early 40s. So really crudely that's €24,000 in interest per year.
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Money Makeover seems like a very good idea in this case. See here also.
 
Barbara Bunter said:
Yes we've been looking at that. We're spending €24,000 a year on holiday rentals. Mortgage rates seem to be around 3.5% in Portugal at the moment(!). We're hoping to borrow €700,000 over 30 years with a deposit of €300,000 which seems to be possible as the banks advertise that they'll go to age 75 and we're in our early 40s. So really crudely that's €24,000 in interest per year.
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You mentioned in an earlier reply that you would plan to spend about three weeks in this place in summer, and here you say you spend about €24'000 a year on holiday rentals.

I had a quick look at some holiday rentals in the Algarve, to give one example I found a very nice 2 bed penthouse in Luz , balconies, sea views, spa in the building, full month of July 2023 (peak season) costs €4'500. You could have such a place for at least 6 months for your €24'000.

On the other hand, property purchase costs in Portugal are high, in particular the Property Transfer Tax. You hope too borrow €700'000 plus a deposit of €300'000, so it seems a place for €1'000'000. The transfer tax and stamp duty on such a place will be approx €70'000, plus lawyers fees and notary charges. This you would need in addition to your deposit.
 
planck said:
You mentioned in an earlier reply that you would plan to spend about three weeks in this place in summer, and here you say you spend about €24'000 a year on holiday rentals.

I had a quick look at some holiday rentals in the Algarve, to give one example I found a very nice 2 bed penthouse in Luz , balconies, sea views, spa in the building, full month of July 2023 (peak season) costs €4'500. You could have such a place for at least 6 months for your €24'000.

On the other hand, property purchase costs in Portugal are high, in particular the Property Transfer Tax. You hope too borrow €700'000 plus a deposit of €300'000, so it seems a place for €1'000'000. The transfer tax and stamp duty on such a place will be approx €70'000, plus lawyers fees and notary charges. This you would need in addition to your deposit.
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We go for three weeks in the summer. It's €8,000 a week which is where the €24,000 comes from. Your point about stamp duty is interesting but it seems that a lot of properties out there are owned by companies which reduces the stamp duty considerably. It would be important to get advice over there to state the obvious.
 
Sue Ellen said:
Money Makeover seems like a very good idea in this case. See here also.
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Thank you. We are in our early 40s. We own our own home. The mortgage is on a low fixed rate and we overpay the maximum allowed each year. We owe the bank about 20% of the value of the house. I'm in the public sector and my spouse is in the private sector. We have two children. My spouse does the top level of extra pension contribution. We have no other debt. We have savings of €370,000. After living expenses, holidays and the mortgage we have a surplus of about €50,000 a year. The idea is to use €320,000 of our savings and the €50,000 a year to buy somewhere.
 
Barbara Bunter said:
Your point about stamp duty is interesting but it seems that a lot of properties out there are owned by companies which reduces the stamp duty considerably. It would be important to get advice over there to state the obvious.
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Local expert (paid) advice will be critical there. Owning property through a company is generally a bad idea here, it may be the same there, it may not. There are also additional costs and tax implications of owning a company.

Given that the interest charges alone will match the €24k a year you are currently spending, owning a property there will cost considerably more each year. Once you factor in all the additional costs of property ownership, you'll may well end up on the wrong side of €40k a year just to holiday in the same property year after year.
 
noproblem said:
There'll be management fees, insurance, bank account, electricity bills, water bills, wi-fi connection, municipality charges, etc. Furnish and fit out the place. Install A/C if not supplied. You'll need to know or have a contact no for a handyman/woman for painting, diy, fixing and mending all sorts. If renting, you'll need someone to get renters, give and collect keys, do laundry, supply bed linen, check for damage, money transfer, etc. Leaks and things going wrong, etc, etc, etc. That's only for starters and before you set a foot in the place.
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Nicely done @noproblem , it's great to have an inventory of all those expenses & variables that have the potential to go wrong.
 
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