How To Buy Rental Property In Lagos, Portugal

An Old World Pied-À-Terre With A Rooftop Terrace And A Sea View For As Little As 100,000 Euros

I think I was right in the first place.

I reported yesterday that my preferred location on Portugal’s Algarve coast would be the city center of Lagos. The old town of this waterfront city is my kind of place, made for walking and offering many choices for escaping the midday sun in shaded cafes and restaurants where you can enjoy the harbor views and the pleasant company along with your ice cream or glass of prosecco. Arriving in Lagos, I felt immediately at home in this centuries-old walled city.

However, I recommended that you might do better to think about spending your time and money in Carvoeiro. On paper, Carvoeiro checks all the right boxes and stands out as a great choice for a rental investment property that you could use a few weeks or months yourself each year if you wanted.

That’s still true. Carvoeiro would be a top choice right now, not only in Portugal but the whole world considered, for an investment purchase.

However, it’s in Lagos where, as I said, I felt at home right away. That kind of instinctive response shouldn’t be ignored, and, now that I’ve had a closer look at Lagos, I’m convinced. This is a town for me. Lagos is authentic Portugal supported by modern amenities, a medieval city whose long history is visible in the still-standing Roman walls and celebrated in annual festivals and daily routines.

Yesterday afternoon I was able to get inside some properties in old town Lagos. Not all agents are interested in showing these kinds of apartments. Other agents we’ve met focus on bread-and-butter rentals, on commodity properties. Speaking with them, we’ve been reminded of our first property shopping experience in Europe, years ago, in Ireland. We told agents we met with in Waterford that we wanted an old Georgian house on a piece of land in the country. Agent after agent listened to our description of what we were looking to buy, and then they took us to see new-built bungalows, as they called them, in housing developments just outside the city. They didn’t have old Georgian houses in country settings to show us, so they showed us what they did have on their books. The same is true in any non-MLS market… including here in the Algarve.

In any non-MLS market, therefore, the burden is on you, the buyer, especially if you’re in the market for a not-typical purchase.

Here on the Algarve’s coast, you’ll have no trouble finding a real estate agent to show you one- and two-bedroom apartments in resorts and development community settings that’d rent well to holiday-goers in season and golfers year-round. However, I’m more interested in something a bit different, with history, character, and charm. Yesterday I saw several such apartments, each very different from the others (that’s part of the point) and each with its own pluses and minuses. One just one block back from the central waterfront square with a small balcony and a rooftop terrace with an ocean view was priced at 100,000 euros. It needed some work… but 100,000 euros? For an apartment in the heart of a historic European city? You can’t beat that.

Another property we toured had been carefully and cleverly renovated and decorated in Moorish style. This colorful and fully updated apartment featured a private courtyard and was priced at 125,000 euros.

These are special finds. Again, not every agent is going to be able or interested to show you these kinds of properties, but they’re available, in limited supply, and can be an absolute bargain.

The challenge is balancing an investment agenda with a personal one. Are you more interested in maximizing your return from rental income… or is that objective equaled by an interest in being able to spend time in Portugal? The 100,000-euro apartment I mentioned above is four stories, including the rooftop terrace. Three flights of stairs and no elevator. Not a problem for me but not ideal for a rental property.

The 125,000-euro courtyard apartment is on one level and in a great location but has neither an ocean view nor a swimming pool. These things may or may not matter to you, but they would count as black marks for anyone shopping for a Lagos rental.

If rental income is your priority, you might be interested in the fully turnkey resort we also toured yesterday afternoon. This five-star property includes indoor and outdoor swimming pools, a spa, a restaurant, and 24/7 on-site concierge service. It also comes with the option of a guaranteed annual return.

Remember that foreigners can obtain local financing for the purchase of property in this country, though this is harder to accomplish today than it was pre-2008. Banks are lending to foreign buyers but discriminatingly. You’ll need to satisfy them as to your income.

Also, remember, European financing terms differ from what you’re probably used to. You could be able to arrange up to 70% loan to value financing with an interest rate of as low as 2%. However, that rate won’t be fixed but variable, reviewed every six months. You’ll have to get life insurance for the term of your loan, and you won’t be able to get either a loan or insurance beyond age 75. That is, if you’re 65 years old today, the maximum loan term you’ll qualify for will be 10 years.

Kathleen Peddicord

P.S. I’m writing from the scene of this week’s Live and Invest in Portugal Conference, which kicked off this morning in lovely Carvoeiro on this country’s beautiful Algarve coast. Today we’ve heard from residency, property, and tax attorneys, as well as a local developer focused on properties intended specifically for the foreign retiree market and a couple of longtime friends who’ve been part-time Algarve expats for 40 years.

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