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Portugal, The Smart Way Of Property Investment

Jun 8, 2008
You frequently hear about people who made their fortunes investing in the stock market, but you also hear about investors who lost their cloths playing the same game. You hardly ever hear about overseas real-estate investors who go bankrupt, however; that's because it doesn't happen often, at least not in Portugal property investments.

Those smart individuals who invested wisely in the Portuguese real estate market many years ago are living a very comfortable lifestyle. Investing in Portuguese real estate can bring interesting returns, so if you're just getting started or have considered investing in real estate, the information that follows is invaluable.

Go your way and take this calculated risk
No one hears about how much money one can make investing in real estate in Portugal. That's probably because it is a well-kept secret. If everyone knew about it, everyone would be doing it, right?

Wrong. Much like starting your own business, investing in real estate requires entrepreneurial skills and a vision, which is why not everyone is jumping on the real-estate bandwagon.
In fact, most people aren't willing to take the risk that real-estate investing entails; fortunately, these are the same people that will make you rich by renting from you. The little secret is that there are hundreds of individuals who procrastinate for every one individual who has a vision and chooses to take the risk.

What Lies Ahead?
Investing in real estate in Portugal requires a lot of time; you need to deal with a vast array of tenants, the good ones as well as the bad ones. Just like a business, you also have to deal with operating and fixed expenses, such as heating bills and renovation costs.

On the other hand, you don't have to wear a suit all day and run around doing someone else's bidding. Your dress code can consist of shorts and a shirt six months out of the year. If you want to go out of town for a few days, you can. You don't have to ask for vacation time.

While you are out of town, your rents keep ticking away 24 hours a day, seven days a week, whether you're on the job or not and those loans keep amortizing. The magic is happening just the same. There are plenty of benefits in real estate in Portugal.

Cash flow
Cash flow is the difference between your income and your expenses on a piece of property. You can have a positive or negative cash flow. Obviously, you'll feel a lot better if the cash flow is positive.

A little advice on cash flow: Never use all of your positive cash flow for rapid debt reduction. You will be walking a thin line. By keeping a strong positive cash flow, you will have more options and space to manoeuvre.

The Benefits
Aside from being your own boss, having the freedom to travel while earning profits, increasing your net worth, and having a place of your own to call home, investing in real estate holds even more benefits.

Appreciation is the increase in value of a property. There are two kinds of appreciation. The first is from economic conditions beyond your control, such as inflation. But you won't gain much from this type of appreciation since the gain is offset by the higher cost of living.

The second kind is market appreciation, which you can control. When you improve a property (through renovations), you force its value higher. You can purchase a piece of property in need of repairs and bring it back up to neighbourhood standards or slightly higher; this will give you a property that is much higher in value.

Leverage is the ability to borrow a percentage of the value of a piece of property. Real estate in Portugal, in comparison to other investments, offers a very high degree of leverage. In most of the cases, a couple buying a Portugal home can obtain 75 percent financing. This allows individuals to purchase real estate with little, of their own money. What other investments offer such a high degree of leverage?

Tax Advantages
Owning real estate in Portugal with the goal of making a profit allows you to deduct interest payments and other expenses come tax time. But don't be fooled into buying real estate for the tax advantages; rather, purchase it because it makes economic sense to do so.

With leverage, or the use of other people's money, comes a repayment schedule. Your outstanding balance is reduced with every payment you make. Part of each payment goes to interest (applied first) and the rest goes to pay off the principal. The principal reduction is called amortization -- reducing debt. Hence, amortization can make you wealthy, slowly and steadily.

Benefits of Buying
Owning overseas real-estate is a great way to achieve your financial freedom. The benefits are definitely there.

Finally we can state that the real estate investment in Portugal is always worth to be considered, now and in the future.
About the Author
Antonio is the webmaster of http://www.silver-coast-properties.net, a site that offers a wide range of useful and helpful information about properties in Portugal. Visit hes site for more informations.
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