One of the main benefits of investing in real estate is the solidity that the property can bring. Two of the ways to get a return is by valuing the property over time or by renting it.
Renting is considered a valid approach because each year the Algarve is receiving more tourists looking for villas or apartments for vacations.
Short term rentals are usually charged per week and prices may vary between 800€ and 1500€ depending on the location. For the property to be suitable for this rental it must be registered as ‘Local Accommodation’.
To request registration it is necessary to:
-Have a Fiscal Number – NIF in the individual name.
Before starting the registration request it’s necessary to initiate the activity, to do so, access the ‘ Portal das Finanças’ and fill out the declaration of the beginning of the activity.
The registration request is made in the Balcão Único Eletrónico where a registration number is created and if there is no opposition from the municipality, the analysis period lasts about 10 days or, in the case of hostels, 20 days.
During the request, it is necessary to pay a fee that varies according to the type of the property. The available types are:
- Villa: A property consisting of an autonomous building, of single-family character.
- Apartment: consisting of an autonomous fraction of a building or part of an urban building susceptible of independent use.
- Lodging establishment: A property whose lodging units consist of rooms, integrated in an autonomous fraction of a building, in an urban building or in a part of an urban building susceptible of independent use. In this case they are also considered hostels.
- Rooms.
Remember that the maximum capacity of local accommodation establishments is 9 rooms and 30 users.
On the application form, you should also fill in some basic information, including the intended opening date.
And if you are thinking of buying a property to rent, it is important to do a monthly profitability calculation, which consists in dividing the rent (monthly) by the value of the property purchase.
A good return varies from 0.5% to 0.8%, and an excellent return is above 0.8%.
For example, supposing the property’s rent per week is €800, you will have a monthly return of €3,200. And the purchase price was $300,000. So the calculation stands:
3200(monthly rent)/300,000(purchase price)= 0.01 x 100= 1% return.
What to take into consideration when buying a property for short term rental?
-Location: In the Algarve, the demand for rentals can be properties in the heart of the historical center, in a rural village or near the sea. However, we advise you to check the accessibility surrounding the location.
-Type of property: There is always a higher demand for properties with 2 or more bedrooms. In the case of 1 bedroom properties, we advise placing a sofa bed in the living room.
Why the Algarve?
Besides the tax benefits available such as golden visa programs, non-habitual residents, and D7 visa, increasingly, people from all over the world seek our golf courses, the various water sports, the rich cuisine with fresh food mainly fresh fish brought in daily by fishermen, and of course, the pleasantly temperate climate.
Additionally, this summer the Global Peace Index report was published, in which it concluded that Portugal is the 6th safest country in the world.
Therefore, investing in Portugal gives you more value for money and investment choices, thus opting for local accommodation as a form of investment, besides bringing short term returns, is a good opportunity for you to have a second home during the low tourist season.
For any additional information you can consult the registries, and you can also access the brochure on Portal das Finanças.
