As Portugal exits the recession and with the growth in the building sector, the real estate market is a strongly recommended investment, allowing an extra income for those paying attention to the economy.
With cash flow being the basic investment concept, it simply follows its appropriate application in the property of choice – either on a short or long term – and wait for the results.
Cap Rate and taxes
To calculate the potential that a property has in today’s economy we use the “Capitalization Rate”, which gives us the rate of return on a real estate investment property based on the yearly income that the property is expected to generate.
One also has to take in consideration that interest rates on bank loans for this sector can either be fixed or variable.
To buy cheap
Location, accesses and supporting services are determinant. One of the most commonly used methods is to purchase a cheap property and expect that the area improves to sell it at a later date.
At the moment of transaction, the total value must include the purchasing costs, as well as the legal and registration expenses.
Real Estate Rental
Property rental is a good way of generating extra income. Location determines the price, with the rent being based on the initial cost, the required up-keeping and the maximum value that can be charged.
Properties with high maintenance costs ought to be avoided, as the costs are charged to the owner.
Finantial Leverage
A process which is used for long term real estate investments, allows investors to achieve higher returns while calling upon existing applications to secure the loans, thus spreading the risk and maximizing profits.
Pheriferic Zones
Portugal’s improved media image due to the increase in tourism as well as the golden visas program has attracted foreign real estate investment. Easy access to home finance has almost saturated the main cities such as Lisbon and Porto, pushing the available opportunities to the surrounding areas.
Remodel to sell
A different technique is to purchase real estate at low cost and remodel it in order to get a higher profit at the moment of sale.
This model requires the need the contract the applicable remodeling services, that can be obtained in same cases through association.
Niche Markets
The digital era has allowed for the creation of niche markets that are now gaining relevance near real estate agencies. Local lodgings, room rentals, tourists’ hosting or the leasing of business spaces are markets already being explored and that represent extra profitability to the property and the wallet.
Article produced in partnership with INS
