We’ve often been asked by guests how they should start the process of buying a property abroad – and what the purchasing process is like in Portugal. And once you’ve bought your dream holiday home, how much does it cost to maintain.
When we were trying to get an idea of how much things would cost (purchasing costs, electricity, water etc.), we found information hard to come by – and most of the research available was very dated. Hopefully this blog will give you some rough numbers to start with.
Finding a property
We weren’t overly creative here - we used Rightmove Overseas (https://www.rightmove.co.uk/overseas-property/in-Portugal.html) - most of the properties for sale in the area (we were looking for) seemed to be on there. But more than that, it should help to give you an idea of what the market price is for the size and location of the property you’re looking for.
It is worth ‘Googling’ local real estate agents too, but Rightmove really had 90% of the houses on their site.
In our opinion, the Portuguese purchasing process is far better than in the UK.
Putting an offer in on a property and agreeing a price is one thing, but it doesn't grant you any exclusivity.
The only way that happens is by reaching a 'Promissory Contract' - this is when you would need to put down a deposit (ours was 15% of the purchase price, but it can be anywhere between 10%-30%).
At this point you'll need to engage a Solicitor - but the basic premise is if you withdraw from the process (after signing the Promissory contract) then you lose your deposit. If the seller withdraws from the process (after signing the Promissory contract) then they need to give you twice the amount of your deposit back.
From agreeing an offer to signing the Promissory Contract can often take as little as a fortnight.
In comparison to the UK – where purchasers can withdraw right up to the point of Exchange, we think the Portuguese approach compels sellers and buyers to show commitment to the transaction.
After the Promissory contracts are set, all parties commit to a specific completion date (normally 30-60 days post Promissory).
At no point did we have to be in Portugal for any of this. We granted Power of Attorney to our Solicitor and she took care of all of that for us.
The purchase costs felt quite high in Portugal. IMT, Stamp Duty, Deed & Registrations, Utility Contracts and Solicitors fees came to around 8.5% of the purchase price, so you'll need to factor those costs on top too.
This was the part that we found hard to gauge. By far, the best website we found was https://algarveblog.net/2011/09/22/how-much-does-it-cost/ - which helped us to pull together an idea of probable costs.
We only purchased our house in January 2018, so we've only got one year's worth of accounts. For last year our core bills were roughly:
Advertising/Marketing -(HomeAway, Airbnb, Website) - £500
Electricity - £1700
Water & Sewerage - £130 "Council Tax" - £370
Other costs depend on whether you're buying in a resort (like at "The View") or purchasing a stand-alone property. All the owners at "The View" have to pay condominium fees to ensure that the facilities outside of the house (pool, gardens etc.) are maintained. That's roughly £3000 per year (paid quarterly). If you're buying a standalone property, you'll need to get a tourism licence for that house (called an Alojamento Local), but then you're obviously responsible for the upkeep of your property.
If you’re renting your property out, you'll need someone who can take care of cleaning and maintenance. Over 2018, we paid out around £4500 for their services, but around £1000 of that was replacing a faulty air conditioning unit when we first bought the house.
Your other option could be to ask a rental agency to provide a full-service package - so they'd advertise/market and rent the property out, organising cleaning & maintenance etc. - but I think they'd take c.25% for their effort. It would be your decision whether you want to make the most money or take the hassle-free option.
So that’s your bills covered. What can you expect to achieve as an income from renting your house out?
Before OwnersDirect became HomeAway, it was easy to see how other properties were performing in the same area as you. The annual rate card and the availability calendar meant that you could easily see what kind of income other owners were achieving.
HomeAway doesn’t show this anymore. It’s still possible, but it’s something that’ll require a lot of manual work. You’ll need to go into each calendar and try to work out what the weekly costs is during each month of the year. You can then look at their occupancy and you’ll get a rough idea.
What worked well for us (and it was accurate for 2018), was to look at the thirty weeks between 1st April and 31st October. We worked out that any bookings outside of that would be limited. We then assumed that we may achieve 60% occupancy during those weeks. So we worked out our average weekly charge and multiplied that via the anticipated occupancy.
It proved accurate for us, so whilst it’s not completely scientific (or not scientific at all!) hopefully it’s a good benchmark for you.
Hopefully some of the above helps you to plan your holiday home purchase. If there’s something glaring that we’ve missed, let us know and we’ll do our best to help.