How Much to Spend on Retirement Home in Portugal?

[Eric S]

Hi!

I am 56, single, and retired. No kids.

I have $2.5M total assets (including house value). $22K in a conventional IRA. I expect only (conservative) investment income. I have minimum work credits for SS benefits (i.e. $887/month @ full retirement age).

I plan to move to Portugal in 2022.

My current house is worth $700K (bought for cash). I intend to sell it before moving.

I spend circa $60K/year, all told (including insurance, etc). In Portugal I will spend $30-40K/year (at current currency values), but could easily spend less.

Questions:

1. What would be the prudent max to spend on a house in Portugal? (note: I wouldn't imagine paying over $700K). I'm not thinking of it as an investment (though I do expect prices there to rise); I don't intend to move again, and my heirs are already well taken care of.

2. Should I mortgage it? I don't pay much taxes, so I guess it's mostly an inflation-related question. I do expect to beat the current 30 year rate with my investments....

thanks!

 

[Eric S]

Wow, 103 views with no replies! I'd appreciate even uninformed, off-the-cuff replies from people! I know there's no one absolute answer!

 

[arbeadub]

I think at your age I would buy or rent an RV, then explore the continent.

 

[RobbieB]

Spend what you net from selling your house. No more.

Anything less, just blow it!

 

[accountingsucks]

I can't speak to Portugal but thinking of similar thing in Northern Italy in about a decade. Have you actually spend significant amount of time there to verify your expected annual costs? When people say Europe is expensive I disagree completely. Sure the big cities are very expensive, but small to medium sized centers are very reasonable in terms of groceries, sporting activities and rent if you choose not to buy. For example where I am from you can EASILY rent a house for about 700 Euros per month. So perhaps renting might be an option if there is similar pricing there?? One thing to be cognizant of in Europe is that if you do any kind of exterior renovation it is very expensive and must adhere to the standards of the region.

 

[copyright1997reloaded]

i'm curious about the consensus on this also. I've been struggling with how much house/condo/townhouse I should buy if/when I ever move.

For example, assuming the current residence is worth $350K, but that I could swing something much higher (e.g. $1 M+) w/o impacting the safety of retirement, is it crazy to up the housing investment so much? I'd assume the answer is that it depends - what that spend gets someone is all based on location, and that sometimes you just have to pay to play?

 

[accountingsucks]

One other thing to think about is that if you sell your house in the US (which generally increases in value by more than inflation each year) and buy in Europe, what will the house value do over the next decades in Europe. In Italy many towns suffer with aging population and there are literally no buyers for some of the properties. On my last trip to Italy you can see the houses that have been abandoned. Generally real estate values trend downwards every year there in many of the smaller centers.

Not sure if that is also an issue in Portugal but I think it is as one of the issues that causes this is very low salaries. You do not see the same wealth gap in Europe versus the US, however one of the downsides of that is that everyone kind of makes the same with "the same" being not very much. Have many relatives in Italy making around $1500 per month and that is considered an average salary there. That obviously will impact the price of housing in a negative way. Sure their work culture is great but at the cost of innovation and efficiency in my opinion. Just look at the European stock markets versus Nasdaq if you don't believe it's true.

 

[Out-to-Lunch]

Are you interested in a "Golden Visa" by investing in real estate in Portugal? If so, then spend at least 350k euros! https://nomadgate.com/portugal-golden-visa-guide/

 

[latexman]

Rough calcs.

SS will pay you $10k/year. You’ll need $30k/year more. $1M @ 3% SWR will give you that. That leaves $1.5M for a home in Portugal.

Looks doable, but I’d look for a more modest house and blow more dough/year.

 

[W2R]

A lot depends on what you find, and how much you want it! Despite having a smaller nest egg than you, I was prepared to spend as much as your present house is worth since I am really a home body and wanted to find my "Dream Home". However I found it for less than half of that amount.

I am older than you, 72, and have found that I prefer an easy care, smaller home, to an impressive mansion at this stage in life. Think of what you will really need in Portugal as you grow older, and try to envision your future life there.

If it was me, I'd retire, move over there, and then spend a few years looking for just the right home. Well, if that is possible with an international move! I don't know much about that aspect.

Personally I prefer paying cash but that's just individual preference.

I would have responded to your original post earlier, but I didn't see it! I didn't spend much time here today. It's an interesting topic, so thanks for posting it.

 

[NW-Bound]

I took a long road trip through Portugal last year. The cost of living in Portugal is quite a bit lower than in other Western European countries. In a town called Peso da Régua, I sat at a square outside the town museum, nursing a small bottle of beer that cost me exactly 1 euro. I think I ended up drinking two. I imagine the cost of a home there would not be very high.

So, where does the OP want to live? In a small town, or where it's more crowded? A quick look on the Web shows small apartments of 1,000-1,500 sq.ft. near the ocean in Algarve going for US$250K to US$500K.

In Lisbon, US$500K gets you about 700 sq.ft.

 

[NW-Bound]

Oh, I recalled that my wife had a cappuccino that also cost 1 euro. Of course, there was no tax or tip added.

Later, we went to have dinner at a decent small restaurant, and paid less than 30 euros something like that for both.

PS. I love grilled fish in Portugal. Fresh fish does not smell fishy at all. My wife who is not a fish eater had fish like I did for several meals.

Oh, how I would like to go back. But the world is big, my remaining time is limited, and there are still so many places I want to visit.

 

[NW-Bound]

Hey, I found on the Web a photo of that town museum, and the square where we enjoyed our wonderfully cheap drinks. It was as deserted in the photo as when we were there.

Sorry if this detracts from the OP's thread, but it begs the question: Do you really want to settle down in one spot, if you can spend time and money to travel, see, and experience more places and things? Perhaps the OP has some roots in Portugal, and has a specific place that he is fond of. In that case, it all changes.

 

[Nemo2]

Oh, I recalled that my wife had a cappuccino that also cost 1 euro.

For €1 we had the best Caldo Verde ever at a standup cafe/bakery in Porto.

No questions, but if I did, one might be "Why Portugal?"

 

[Sunset]

Wow, 103 views with no replies! I'd appreciate even uninformed, off-the-cuff replies from people! I know there's no one absolute answer!

I'm wondering if you know what area of Portugal you want to live

Wouldn't the cost of housing be determined by where you want to live.

I've only been off a cruise ship briefly in 2 cities in Portugal, so I know nearly nothing and therefore feel qualified to give you advice to follow
I think you should rent for a year or two, to be sure you want to live in that area, vs some other part of Portugal or even Spain close by

 

[NW-Bound]

For €1 we had the best Caldo Verde ever at a standup cafe/bakery in Porto.

No questions, but if I did, one might be "Why Portugal?"

I don't recall trying Caldo Verde when I was there. Just looked on the Web, and it looks like something I can try making at home.

About your question, I would reply "Why not Portugal?" It has plenty of nice things going, just like any other place where one can settle down.

I just recalled that a forum poster, ItDontMeanAThing, has moved from Asia to Portugal. Darn, is my memory good or is it superb?

He has a blog which I have not visited in a while. Interested readers can find the latter in his profile page.

 

[RobbieB]

I'll stick with chili verdi at the local taqueria por favor!

 

[chris2008]

I'd first rent, maybe through Airbnb, in various locations to test the waters and till having mastered some of the language.
The tax incentive (?) is not worth to buy in the wrong place IMHO. And if the Golden Visa is your goal, your neighbors might hate you for driving up cost of housing in their hood.

 

[Nemo2]

About your question, I would reply "Why not Portugal?" It has plenty of nice things going, just like any other place where one can settle down.

I've been to Portugal a 'few' times, first visit was 57 years ago....seen numerous places there. Just struck me as 'odd' that the OP selected this 'one country' but doesn't elaborate on 'whys or wheres' and doesn't appear to know what to pay.

Variations on a theme: "How long is a piece of string?"

 

[MrsHaloFIRE]

I would rent. Maybe high end, maybe moderate range and get the lay of the land. Unless youve already spent months and month contuously there and are certain 1) the area is right for you 2) how much indoor vice outdoor space you need. THis would be too big of a variable to want to screw up.

 

[ShokWaveRider]

Portugal is a beautiful country, but it would not be our first choice for retirement. Not for any other reason but the Language is a bear to learn. After spending a lot of my working life going to and from Brazil, I am certain I would never master Portuguese. Now Spain is a different story.

Obrigado.

 

[NW-Bound]

I've been to Portugal a 'few' times, first visit was 57 years ago....seen numerous places there. Just struck me as 'odd' that the OP selected this 'one country' but doesn't elaborate on 'whys or wheres' and doesn't appear to know what to pay.

Variations on a theme: "How long is a piece of string?"

The OP only asks for an opinion on how much he should spend on a home given his financial status, and not on other aspects of buying a home in Portugal. It looks like he has some locations in mind already.

A person often relocates to his roots. Or he has worked there, and has some familiarity with the place. Or a person may fall in love with a locality after reading about it.

About the latter rather risky source of motivation, I wonder how many people successfully follow in Frances Mayes' footsteps after reading her memoir Under the Tuscan Sun (1996). The book was the inspiration for a movie with the same title.

I used to dream of having a home in Provence after reading the many books by the late British author Peter Mayle about his life there. Then, I slowly realized that even as a Francophile, it would not be so easy for me to live there long-term. An exotic place that one falls in love with may lose its appeal once one discovers the hassle of settling there. It is safer for me to make repeated visits than to make a serious commitment.

 

[Lagniappe]

I have been looking into the Portugal Golden Visa since the lockdown started. I am interested because with a Portuguese residency Visa, I can spend more than 90 days out of 180 in the Schengen Zone. You don't have to buy real estate to get the GV anymore - you can invest in government approved Investment Funds, many of which invest in a portfolio of commercial and residential properties. A startling number of Americans are on various forums either moving or inquiring about moving to Portugal. Many of them read about Portugal in International Living, and are attracted to the lower cost and the hype about lifestyle. But a lot are digital nomads, and there are decent sized communities of techies in Lisbon, Porto, and the Algarve.

The most informative I have found is a facebook rgoup called Americans and Friends in Portugal. They focus on the facts around getting a visa, finding a place to live, and differences between living in Portugal and living in the USA. Everyone, and I mean everyone, who has moved there suggests you rent first, or at least spend a LOT of time on the ground researching. There is such variety in villages/ neighborhoods/ housing that locking yourself into a large purchase is a problem. And outside of the prime areas, homes sit on the market for years, so changing your mind can be a costly and time consuming mistake.

If your question is about how much you can afford to pay for a house, probably about 1 Million. I doubled your spending and used a 3.3% withdrawal rate. What is left, you can spend on whatever you want, including a house. I would question your COL assumptions, depending on where you choose to live. Locals have been priced out of prime neighborhoods in Lisbon by Airbnb and expats, and other prices are increasing as well. I saw a recent Vlog by a family of four who moved to Lisbon last year - they broke down their spending in youtube video each month - it averaged about $4500 per month in a very nice historic district apartment, with no car and no travel outside of Lisbon.

 

[Nemo2]

The OP only asks for an opinion on how much he should spend on a home given his financial status....

Ah.....so, "Blow that dough"...if you have it, spend it? OK.

 

[braumeister]

Portugal is a beautiful country, but it would not be our first choice for retirement. Not for any other reason but the Language is a bear to learn. After spending a lot of my working life going to and from Brazil, I am certain I would never master Portuguese. Now Spain is a different story.

Funny, I had the opposite impression. Lived and w*rked in Brazil for several years and mastered the language without much trouble.

What I liked was that a Portuguese speaker can easily understand Spanish, while those from the surrounding countries struggle mightily with spoken Portuguese. Written language is OK for reading, but a Brazilian speaker, especially with some regional accents, is nearly incomprehensible to an Argentine. It's kind of like a one-way mirror.