I am often asked what are the best Real Estate investments in Portugal (and my markets in particular), and how exactly I can reach almost 20% net ROI. This post will give you a good idea of what I do.
The most important question, for me, is buying multi unit properties. In Portugal, there are plenty of them. Let me show you an example:
(retrieved from Google Maps)
This is probably a 6-unit property (this one is merely an example – probably not a residential property), which you can rent out for 300€/mo a piece. Altogether, it should yield close to 2000€/mo. This is actually similar to my RP#3, which I bought for about €34k (bank appraisal came out at about €200k).
Multi-family properties
The question of a multi-family property vs a condo is a lot more complex than other popular questions in investment, such as the question of roth ira vs 401k, when it comes. A multi family property is the way to go in my specific markets because of a simple rule: a two family property yields, on average, 2x that that a single unit property does, but it does not cost two times more. If you compare high unit properties (such as 4 plex, 5 plex or 6 plex – as my RP#3) with single properties, the ratio is even better, from my experience.
Modular, mobile and prebuilt homes
Modular homes (also known as mobile, prebuilt and manufactured homes) are also hot these days, although I haven’t bought any yet. Investors are buying lots throughout and they build cheap modular homes almost overnight. The cool thing about modular homes is that you can pretty much rent them for as much as a “regular” home, but it will cost you much less. What makes them attractive in Portugal, is that you can buy lots close to the cost (there are plenty of sweet deals if you know where to look), build a 4 plex modular home and rent them by the night. The greatest advantage is that you build modular homes optimized for renting, let lots appreciate, and pack your home and leave once the lot appreciates to interesting figures. You can deploy your modular homes on other lots and repeat.
The cost of modular homes is also much lower than conventional homes and typically short-term rentals do not care if you’re offering a modular home or a conventional one. Finding mobile homes for sale can be an option, instead of buying them new and having them deployed somewhere. I typically find them in Craigslist-type of websites. In fact, you can find other types of prebuilt homes – and as long as you can move them around, they qualify for this strategy. The other good news is that when you can find manufactured homes for sale, they are usually way more depreciated than common Real Estate properties, from my experience. At the same time, they also depreciate in your hands. That is why I look for second-hand modular homes.
Deep value deals
Deep value deals are really the cherry on top of the cake. Of course that those are harder to find, and you need to work hard to find motivated sellers. The best way to find motivated sellers in my markets is, in my view, through real estate seminars and real estate investor magazines. You don’t really find the buyers there, but you can find a bunch of agents who specialize in deals for investors, and they know investors look for juicy deals. I personally found a few great deals this way, and eventually bought RP#2 through this route.
Stay hungry and fight on!
Ben