EUR 280,000 Properties Comparison & Refundable

Hi,

Context:
I nearly did the Golden Visa late 2021, had the NIF, Bank, but didn’t quite line up the funding via my bank for the EUR 350k for Investment Fund. Also a little scared off by delays, glad to see online renewals and backlogs getting addressed now (Still sounds bad, but much better).

I’m back given the last chance, EUR 500k still not do-able, EUR 350k perhaps doable, but I’d much prefer the EUR 280k option.

I do realize as Pella Terra brilliantly put it, the lower investment options are more limited, less open-market, and so are just naturally more risky.

First, why I don’t like the big boy (Mercan):

  • EUR 280k level has no dividend/yield, and no capital gain (Guaranteed buy back means in 10 years they’ll buy it back at EUR 280k right?). 0% return over 10 years (not even inflation!) is a instant NO. The Buy Back’s are also a bit BS (exit clause makes it easy to break apparently).

What I (reasonably) want:

  • To buy an asset, aim (I’m flexible) for say a 5% compound capital increase over 10 years, so EUR 280k = EUR 456k in 10 years. Ideally there’s also a modest yield (2-5%) in most of those years.

My favorite 2 project so far, and compared:
Rossio Palace & The Society Lagos

My general pros of each (over the other):

Rossio:

  • Explicitly refundable deposit if law changes result in application denied
  • They’ve been really active in webinars and offering advice
  • The team are well known Entrepreneurs (though seemingly no Hotel experience, but their team would have this experience)
    https://eu-youthaward.org/winner/filipe-leal/ - speakers
  • [Negative] You own a “share” in the palace, the webinar makes the exit strategy sound rushed vs buying each individual investor out as needed, sounds like you can’t sell your share to someone else. I’m going to ask them a lot more about this soon.

The Society:

  • Developer seems a lot more experience in properties
  • You own the actual individual unit, and seemingly could sell that yourself on the open market (I’m not sure how much freedom you have though to say live in it, vote on property stuff, etc.)
  • Location seems more desirable (southern, coastal)

Good things about both:

  • They both offer free stays (Saves $1,000’s in hotel costs during the 2 weeks required visits and visits for visa/biometrics/etc.)

I’d love to hear your thoughts (If you chose another EUR 280k, If you went with one of these, If maybe there was a EUR 350k investment you think is worth me stretching myself a lot more)

One thought. If you are making a small yield the admin cost (payment plus your time) of doing portuguese taxes wipes out most of it. You may want to trade yield for capital appreciation where you do taxes once. I am assuming you won’t be moving to Portugal anytime soon.

Full disclosure - I have a zero yield 280K with Mercan and am just eating this for the above reason. It’s low hassle and depending a bit on their reputation/ size to get that 280k back. My choices , may not be yours.

Second , is the developer paying all your VAT for the transaction and refurb and annual IMT? I assume so - that can add up otherwise.

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Agree on the whole “0% yield” thing.

I really LOVE how most commercial properties will give you a free week or so as an owner, that’s better than a dividend.

I’m surprised the industry hasn’t expanded this concept further.

They could presumably have a lawyer on a retainer to provide “free” services to investors and reduce/eliminate yields, that would be very appealing to have legal included from application until citizenship.

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I disagree on the yield not being worth the headache. I am making 4% on my 280K euro investment renting it out and should continue to do so for the foreseeable future. I pay about 28% in tax and about $300 for an accountant to file my taxes for me, although I could do it myself. So that’s about 8K euros a year net on the Portugal side. I did have to pay taxes on the property purchase so that’s not factored in there. But overall it was worth it to me for the annual yield and hopefully some appreciation on sale. I wanted a long term rental residential property rather than a hotel.

Unfortunately, the company I worked with no longer does property residential property purchases and renovations anymore.

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Does the Society also pay the VAT, IMT etc? Seems like an interesting option to add to the 280k mix!

They don’t. I was quoted 13k Property Transfer Tax, 1.6k Stamp Duty, 1k Notary, EUR 250 Public Registry of Property.

That doesn’t bother me too much, but I do appreciate the vendors who have reduced the asset value by the tax amount (e.g. built it smaller/less fancy) to achieve this.

There are some other properties I have seen that are similar to, around the 280-300k mark, you pay these taxes too, but they are in the Freehold - Residential space, so you get that additional control over your sale price/timeline.

Of course as per the other thread, lots of risks/assumptions right now.

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Individual residential units have risks. Agree the Mercan deal is free money for the developer and lopsided in their favor. Maybe better off investing that money for higher returns probably double or triple, especially given the uncertainties if you can physically plant yourself in Portugal for 5 years. Given what I am hearing, GVs may be converted into normal residential visas - which will be a huge blow after all that investments. Interesting times.

I am also considering HQA route - its a write off of 175k in my mind unless you are willing to take an active role in the company, but less hassle. If I can double or triple my remaining 105k, the loss of 175k may not be as bad.

What properties does Society offer? It was not clear from the link. Thank you!

I’m curious, did you end up going the HQA route?

The Society had (or has) a webinar soon through NomadGate. Highly recommend it to get more details. It’s basically a Touristic Freehold, which I think is nicer in terms of being able to sell it according to your own timeline.

I have since purchased a Freehold Residential option for the EUR 280,000 category. I just don’t have enough faith in Tourist vs Residential. It’s hard to determine if Tourism isn’t oversupplied in Portugal or not, BUT with Residential it’s clearly undersupplied so I feel it’s much safer as an investment.

The Society webinar was postponed and will happen next week on May 11. To sign up for the webinar, use this link.

Residential housing is under supplied because it’s very difficult to build and being a landlord in Portugal is miserable

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