When choosing Real Estate as the selected option for Golden Visa application, investors usually tend to choose their real estate options according to the return on investment rate of rentals business. By getting a return of 4% on Long term rentals I would say is a pretty much average investments in terms of Business. Specially if you consider that you can still have your property appreciated on price at a rate higher than 10% a year for Luxury / High Standard Level Quality apartments.
If your property has a planned return on investment over 4% for Portugal economy I would say your rentals business is a very good deal. Luxury properties pay usually 1-3% of Return on Investment in terms of rentals.
When investment option of Real Estate is to optimize the rental income, I often request my customers to define if they prefer to do Short Term Rentals or Long Term Rentals.
Short Terms rentals are usually directed to tourists who come with short stays (average 4 nights) and enjoy the city life. This includes also short stay business trips where people often prefer the privacy, convenience and price of an apartment instead of an hotel room. Specially when they travel with friends on in a group.
Long Term rentals are usually defined as rentals for periods over 6 month and with a fix rental and property fully occupied.
Currently and after evaluating both solutions is clearly understood that Long term rentals business is facing higher risk than Short Term Rentals. Long term tenants usually are Portuguese and due to economy struggling in the past years, several of them are loosing their jobs and not able to keep affording rental price at the end of the month. Short term rentals is 90% tourists from stronger economies who are less affected by world crisis and manage to spend an affordable amount of money for their city experience trip.
How much should you expect in Short term rentals properties? If your property is extremely well located on the right spot for tourists you may expected returns of 7-12% with your rental income. Obviously their is bigger uncertainty since you are not very sure your apartment will have guests.
If you plan to do Short Rentals business in Portugal with your Golden Visa Real Estate Investment, please be aware that your property needs to be fully furnished and equipped, which also allows you to block the calendar dates when you need to come over to Portugal and enjoy your own space.
If Long terms Real Estate is your preferred investment type, properties are most of the time available empty, considering that tenants will be their own furniture. With our current economy stage, short rentals is often the best choice, not only because it has less risk but also because has the best return on investment.
