The Absolute Right Time To Act
In 2000, Lief traveled to the coast of Spain to scout. He wasn’t planning to buy anything, just to get a feel for the Spanish costas market at the time. Everyone he met everywhere he went, though, made the same point: It was a good time to be buying. So Lief did. Before he returned home from that trip, he signed the paperwork and made the first payment on a pre-construction apartment in the seaside town of Estepona.
He sold that apartment before having to close on the pre-construction purchase (meaning he didn’t have to come up with the big final payment) for an annualized return of 35% per year.
In 2002, Lief traveled to Buenos Aires. This time he did plan to buy. Argentina had removed the peg between the U.S. dollar and its peso, and the ensuing collapse created a window of opportunity to purchase property in this country for discounts of 50% and more off precrisis prices. In this case, Lief and partners bought three classic-style apartments in central Buenos Aires. These were spruced up and rented out and eventually resold, doubling investors’ money.
It isn’t often that you’re on the scene at precisely the right time to be investing, but, when you are, you should act, as Lief has done in the past and as he and I are preparing to do again now.
“We are here in Portugal at the absolute best time to be buying,” professed one property expert presenting at this week’s Live and Invest in Portugal Conference. “Prices are just beginning to stiffen. We’ve turned the corner, and values are going to appreciate from here. Moreover, the market is more active than it has been in eight years. Properties are turning over in weeks or months rather than months or years. Unless you are looking at commodity-level inventory, you need to move when you see something you like. It may not be available next month or even next week.
“The exception, again, is bread-and-butter properties. There is a lot of inventory of this kind of resort rental. But inventory of everything else is limited. There has been no new construction in this country to speak of since 2008. The supply today is the supply we had back then. People are beginning to think and plan for new developments now, but it will be a while before new inventory hits the market.”
Lief and I like markets at turning points, and Portugal is at a turning point. This country has been through a hard time. People here have been struggling. They aren’t sitting around complaining about the situation, though. They are using it as a chance to reinvent themselves and their country. Lots of innovation is coming into play, to do with residency visas, for example, and investor incentive programs.
Financing can be available, though it’s harder for a foreign buyer to borrow from a local bank today than pre-2008. In addition, bank foreclosures are an interesting opportunity and can qualify for 100% financing.
Most rentals can net 8% per year or better, as much as maybe 12% net per year, depending on what and where you buy and how effective the rental manager you engage.
The biggest frustration we’ve found so far is that it can be hard to get in to view properties this time of year. Everything is rented out.
That is, the rental occupancy claims are not exaggerated.
One important thing to research before purchasing are the tax implications, both in Portugal and, if you’re an American, in the United States. Portugal is not a low-tax jurisdiction, generally speaking, but it is possible to mitigate your local tax hit if you organize yourself properly, as Portuguese experts presenting at this week’s event have explained.
Kathleen Peddicord
Continue Reading: Planned Retirement Communities In Colombia And Portugal
