Should We Buy a Home in Portugal?

[sunsnow]

Hi Everyone -- Looking for some advice from the wise folks on this board. DH and I moved to Portugal a few months ago, and love it. We found an apartment to rent that is pretty nice, but not up to the standards we have grown accustomed to in the US. For instance, there are some on-going maintenance issues that have led to a couple of very smelly guys coming over and making a giant mess and spending the whole day here with us. This has happened a couple of times, and I fear the issues will take more of these sessions to resolve. The kitchen and bathrooms are not as modern and attractive as would be ideal. We've had some drain issues, which also requried a very smelly man to spend several hours with us. Also, the kitchen stove is underpowered. I tried stir-frying the other day, and ended up with more of a stir-steam situation. There is a dog that likes to bark right outside one of our windows (the guest room, luckily). But there are lots of positives to the place -- great location, nice view, big rooms, good neighbors. Our bedroom is quiet. The rent is $1700 per month.

We just took a look at a unit for sale down the block that is nicer than this place in many ways. It is almost twice the size, with a floor plan that works for us. It seems to be very well built, and is located in a well-kept condo community with a swimming pool (we both like to lap swim). I think we would enjoy living there more than here, but I'm struggling with the decision of whether it makes sense to spend the money on it. The cost is likely to be $625,000 once all the fees and taxes are taken into account. The monthly HOA and real estate taxes will be around $400. I think Portugal, like many places, is experiencing a real estate bubble. Professionals earn, maybe, $40,000 per year, so how do people afford these homes? Mortgage interest rates are very low here (like 1.25%), so I guess that is the secret. I imagine that rates will go up eventually, and prices will go down.

I think purchasing property here is probably not a good investment. But in a market full of bad investment options, this unit is by far the best I've seen. If we want to purchase one of these over-priced Portugal properties, we probably should buy this unit. Maybe it is better to live more modestly and save the money. But what am I saving it for? We have reached our FIRE goals, and my husband continues to work (he actually likes it). If this were a Suze Ormann "can I afford it" session, she would say that I can indeed afford it. I've spent so much time trying to save money and make smart investment decisions, that the idea of buying something that will probably lose value just rubs me the wrong way -- even if I can afford to lose the money and would get a lot of enjoyment out of the place.

So much waffling... Thanks for reading, and I really appreciate any thoughts.

 

[Danmar]

If it’s easily affordable to you, it is probably more a lifestyle decision than an investment decision. We have multiple homes and I have never considered any of them “investments”. I like to have control and the best way to increase control is through ownership.

Almost always cheaper to rent than own. Only you can decide if it’s worth it to own rather than rent. Considerations might include: taxes, residency requirements, maintenance costs, would you want to rent it out when not there, etc.

 

[gayl]

The cost is likely to be $625,000 once all the fees and taxes are taken into account. The monthly HOA and real estate taxes will be around $400. ... Professionals earn, maybe, $40,000 per year, so how do people afford these homes?

Ex-pats

homes and I never considered any of them “investments”. I like to have control

+1

 

[brett]

Is there any sort of expat club where you live in Portugal?

It might be worth finding out, attending, and speaking to some 'old hands' who can give you the benefit of their experiences and knowledge.

We were, and still are, considering Puerto Vallarta. We met with an expat who was very knowledgeable. His comments made us think about a few things that we had no even considered.

 

[sunsnow]

Is there any sort of expat club where you live in Portugal?

It might be worth finding out, attending, and speaking to some 'old hands' who can give you the benefit of their experiences and knowledge.

We were, and still are, considering Puerto Vallarta. We met with an expat who was very knowledgeable. His comments made us think about a few things that we had no even considered.

Good idea -- there is a group here and we've gone to a couple of activities. I'll have to ask people what their experience has been with owning vs renting.

 

[davebarnes]

1. Find another, better place to rent.
Keep the $625K invested and up your rent budget by $1000/mo.
Do the math.

2. Sign a long-term lease and find a landlord who will let you do leasehold improvements. People in NYC seem to do this all the time.

 

[Freedom56]

Hi Everyone -- Looking for some advice from the wise folks on this board. DH and I moved to Portugal a few months ago, and love it. We found an apartment to rent that is pretty nice, but not up to the standards we have grown accustomed to in the US. For instance, there are some on-going maintenance issues that have led to a couple of very smelly guys coming over and making a giant mess and spending the whole day here with us. This has happened a couple of times, and I fear the issues will take more of these sessions to resolve. The kitchen and bathrooms are not as modern and attractive as would be ideal. We've had some drain issues, which also requried a very smelly man to spend several hours with us. Also, the kitchen stove is underpowered. I tried stir-frying the other day, and ended up with more of a stir-steam situation. There is a dog that likes to bark right outside one of our windows (the guest room, luckily). But there are lots of positives to the place -- great location, nice view, big rooms, good neighbors. Our bedroom is quiet. The rent is $1700 per month.

We just took a look at a unit for sale down the block that is nicer than this place in many ways. It is almost twice the size, with a floor plan that works for us. It seems to be very well built, and is located in a well-kept condo community with a swimming pool (we both like to lap swim). I think we would enjoy living there more than here, but I'm struggling with the decision of whether it makes sense to spend the money on it. The cost is likely to be $625,000 once all the fees and taxes are taken into account. The monthly HOA and real estate taxes will be around $400. I think Portugal, like many places, is experiencing a real estate bubble. Professionals earn, maybe, $40,000 per year, so how do people afford these homes? Mortgage interest rates are very low here (like 1.25%), so I guess that is the secret. I imagine that rates will go up eventually, and prices will go down.

I think purchasing property here is probably not a good investment. But in a market full of bad investment options, this unit is by far the best I've seen. If we want to purchase one of these over-priced Portugal properties, we probably should buy this unit. Maybe it is better to live more modestly and save the money. But what am I saving it for? We have reached our FIRE goals, and my husband continues to work (he actually likes it). If this were a Suze Ormann "can I afford it" session, she would say that I can indeed afford it. I've spent so much time trying to save money and make smart investment decisions, that the idea of buying something that will probably lose value just rubs me the wrong way -- even if I can afford to lose the money and would get a lot of enjoyment out of the place.

So much waffling... Thanks for reading, and I really appreciate any thoughts.

$625K is a lot of money for an apartment in Portugal. I would not buy at that price. You can get much better deals in Italy or Southern France. Plus the food is much better in Italy and France. Also beware of real estate scams in Portugal.

 

[brokrken]

1. Find another, better place to rent.
Keep the $625K invested and up your rent budget by $1000/mo.
Do the math.

+1

 

[harley]

I would also recommend looking for a better place to rent, as well as checking with the expat organization. If you can find a better place to live that is as cheap or cheaper than the mortgage/hoa/taxes combination I would do that. Even a little more money would be better than taking on the potential loss. Also, whatever repairs you would need in the condo would probably still be done by the same smelly men.

However, having said that, quality of life is really important. If you really can't find a good place to rent, and if you really can afford the costs and potential loss of value, I would say go for it. It's important to feel happy in your home.

But again, I can't imagine that you wouldn't be able to find a really nice place for the cost of the condo. From what I've heard they don't do 30 year mortgages in Europe. A 15 year 1.25% mortgage on $500K (making assumptions, obviously) would be $3K/month, plus taxes, insurance, condo fees, etc. I can't imagine you couldn't find a nice high end apartment or house to rent for double what you are paying now.

Whichever way you go, best of luck to you. I'd be interested in hearing what you decide, so please keep us updated.

 

[brett]

If you do decide to buy, consider carefully the impact of currency-now and projected in the future. This may impact your decision to buy, rent, finance, whatever.

 

[kcowan]

We were, and still are, considering Puerto Vallarta. We met with an expat who was very knowledgeable. His comments made us think about a few things that we had not even considered.

There is nothing quite as good as experience on the ground! We have friends who bought in Antequera, Spain. They lived there for 3 years and now rent it out.

Good idea -- there is a group here and we've gone to a couple of activities. I'll have to ask people what their experience has been with owning vs renting.

We looked at owning and found that it would beat rent if we stayed there for 4 months. What we did not consider was the lower COL. We did buy.

If you do decide to buy, consider carefully the impact of currency-now and projected in the future. This may impact your decision to buy, rent, finance, whatever.

We really lucked in because we bought when the C$ was 1.065 in 2007 plus we removed equity from the market before the swoon. Now the C$ is at 0.778 so the exchange gains are significant. Our budget has dropped to 50% of what it would have been living in Canada all year. Now we can live forever!

OTOH the whole concept of ownership brings responsibilities that were never a factor when renting. Renting is truly a vacation. Ownership brings responsibilities that can be difficult to fulfill year round.

Of course it also brings the ability to make your place exactly what you want.

 

[sunsnow]

1. Find another, better place to rent.
Keep the $625K invested and up your rent budget by $1000/mo.
Do the math.

2. Sign a long-term lease and find a landlord who will let you do leasehold improvements. People in NYC seem to do this all the time.

I like this idea, and actually it is what we tried to do when we got here -- but there is a lack of rental housing in this price range. Either it's a bit dumpy and cheap or its super high-end luxury and costs $5,000/month and up. Maybe as we get into winter, there will be more rental inventory.

 

[sunsnow]

If you do decide to buy, consider carefully the impact of currency-now and projected in the future. This may impact your decision to buy, rent, finance, whatever.

but who knows what will happen with the exchange rates?

 

[sunsnow]

I would also recommend looking for a better place to rent, as well as checking with the expat organization. If you can find a better place to live that is as cheap or cheaper than the mortgage/hoa/taxes combination I would do that. Even a little more money would be better than taking on the potential loss. Also, whatever repairs you would need in the condo would probably still be done by the same smelly men.

However, having said that, quality of life is really important. If you really can't find a good place to rent, and if you really can afford the costs and potential loss of value, I would say go for it. It's important to feel happy in your home.

But again, I can't imagine that you wouldn't be able to find a really nice place for the cost of the condo. From what I've heard they don't do 30 year mortgages in Europe. A 15 year 1.25% mortgage on $500K (making assumptions, obviously) would be $3K/month, plus taxes, insurance, condo fees, etc. I can't imagine you couldn't find a nice high end apartment or house to rent for double what you are paying now.

Whichever way you go, best of luck to you. I'd be interested in hearing what you decide, so please keep us updated.

Thanks -- I will keep you guys posted. I agree that it would be ideal to rent, even up to a bit more than 3K per month. It's just that we've been unable to find anything that is nice but not outrageously expensive (5K+).

 

[sunsnow]

$625K is a lot of money for an apartment in Portugal. I would not buy at that price. You can get much better deals in Italy or Southern France. Plus the food is much better in Italy and France. Also beware of real estate scams in Portugal.

I agree about the food -- but the tax situation is totally unacceptable in France and Italy. Also, Portugal is a safer and more stable place. However, maybe someday we will move on other areas in Europe, so resale is definitely a concern for us.

 

[nirlay]

I am also in the same boat whether to buy small or big. $625K will give me the golden visa, but whether to pour it down in the bubble now is a good idea - I am not sure. I was looking at decent apartments online through brokers and I am looking at $175K or so. [mod edit]https://www.aplaceinthesun.com/ ? I would not think this money as an investment , but would not like the value to drastically drop. What do people think about the house prices and a bubble ? I think properties over 500K euro is selling fast owing to the golden visa rule.

 

[davebarnes]

Golden Visa is available for only €350K.

 

[nirlay]

Golden Visa is available for only €350K.

Yes, but you have to spend more to renovate the property you purchase for €350K.

 

[JakeinChina]

My wife and I looked into the Golden visa and the fees are around 50K to 100K Euro's after your purchase a home for 500K Euro or a older home that needs fixing up for 350K. I would suggest renting at first, then look to purchase something in Portugal that is cheaper then 625K. Portugal home prices are very high now, mostly because of Chinese, Russian and other wealthy nationals purchasing homes in Lisbon. Wait until Brexit kicks in and you should be able to get better deals outside of Lisbon in 2019.

 

[Bamaman]

My niece and her husband had a condo in Faro that they rented out. It was new and very modern, however it wasn't this kind of money. They lived in Weybridge, SW of London, and would use the property often.

I would be hesitant to sink so much into a property there. I would think there are other parts of Portugal that are more affordable!

 

[flintnational]

If it’s easily affordable to you, it is probably more a lifestyle decision than an investment decision. We have multiple homes and I have never considered any of them “investments”. I like to have control and the best way to increase control is through ownership.

Almost always cheaper to rent than own. Only you can decide if it’s worth it to own rather than rent. Considerations might include: taxes, residency requirements, maintenance costs, would you want to rent it out when not there, etc.

+1 Good advice. I would also add, if you have only been in Portugal a few months, you might consider renting a while longer to confirm your first impressions. You could also consider a more upscale rental for the short term.

 

[ivinsfan]

This is the one thing I always laugh about on HH International. People say they want to experiences living like natives in a foreign country. And yet they expect all the comforts and amenities found in higher end US houses. IE they don't want to live in places that the locals live in.

Dogs barking, smaller kitchens, and somewhat dodgy plumbering is probably par for the course.

 

[JakeinChina]

I would read up more on expats and their experiences in living abroad. I recently read about English speaking expats living in Portugal, and although the locals are very nice, its impossible to fit in if you don't speak the language fluently. Your limited to other expat groups, which isn't a bad thing, but you need to understand what your getting yourself into. Lots of lonliness and isolation for some that more abroad. Plus, if your older, do you really want to pick up a new language and become fluent in it? Some may, but most might find it very difficult.

 

[retirementguy1]

Most expats hit a cultural wall around five years in. Id rent for the first five years. Your budget seems really expensive. I spent two months in Spain and a month in Portugal last year and I remember real estate being more reasonable.

 

[Alan]

I would read up more on expats and their experiences in living abroad. I recently read about English speaking expats living in Portugal, and although the locals are very nice, its impossible to fit in if you don't speak the language fluently. Your limited to other expat groups, which isn't a bad thing, but you need to understand what your getting yourself into. Lots of lonliness and isolation for some that more abroad. Plus, if your older, do you really want to pick up a new language and become fluent in it? Some may, but most might find it very difficult.

Your name and profile say you live in China. It would be very interesting to hear your story. Maybe introduce yourself here
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