Is Portugal Real Estate Still A Good Investment?

Chapter 1: Coming Up

So, when we came, we were convinced that it’s a bubble, that the prices would go down. It never happened.

So, for example, last year the prices increased with around 17% to 18% in general. And this is like normal every year since the last five, six years.

So, we are talking here about return on equities of around 20% per year. This is our target return on equity. This is like completely hands-off. But…

There is no decrease in the demand of people that are moving here. So, we see that the market will continue to appreciate…

Chapter 2: Who Is Irina Leka and How She Became a Real Estate Developer

Kathleen

Hello. Welcome to another edition of Living and Investing Overseas with Kathleen Peddicord. I’m here today with my guest, Irina Leka from Portugal.

But before we talk about what she’s doing in Portugal and about the investment climate specifically for investing in real estate in Portugal, which will be our focus of our conversation today, I want to take a step back because Irina is not Portuguese but Romanian.

And so, I think it’s very interesting, Irina, if you don’t mind, if we can share a little of your backstory. How did you end up in Portugal? Why Portugal, of all places you could be doing what you’re doing, which is making money investing in real estate?

Irina

Thank you so much for the invitation. Yes, my story goes back to Romania. Six years ago, my husband and I, we wanted to just have a lifestyle move. And just find a place where we can actually feel that we belong and offers us what we were looking for. And especially people looking for a very child-friendly society and environment.

Because our son, he was small, back then. And we picked Portugal and Lisbon because he had some work opportunities. But in places that were colder and I didn’t feel comfortable with the weather and I said, okay, this is my criteria. I really want to have a good weather.

And we have that in Portugal. I mean, like, it’s a mild weather, it’s not too hot, it’s not too cold, it’s not too humid. You can stay outside and you can enjoy a lot of outdoor lifestyle.

And that was amazing for us. Also, I think it’s the most child-friendly society that you can find. Like, I was amazed on how welcoming Portuguese people are with families and with kids. And we are very happy about this choice. I think it was the best place to raise our kids for this time.

Kathleen

Okay, well that’s great. And of course, we agree. We’ve been shining the spotlight on Portugal for 18 years and named it the world’s number one place to live or retire overseas for many years. So, no argument here. We agree. Portugal is a great place to be. And I’m very happy that you’re happy with your move.

So, you moved for lifestyle to find the lifestyle and the environment you were looking for to raise your family. Did you have already in your mind the idea that you were also pursuing an investment agenda?

Irina

No, I had absolutely no idea. I come from tech startups. I was a former startup founder, and then I moved to Fitbit, and then to Google. So, I worked in Google Portugal.

But at some time I felt the time I need more, you know, and I wanted to go back to my entrepreneurial career. And I found this opportunity because I graduated design in the architecture school. So, I still have deep affinity with physical spaces.

And I started to study a bit the real estate market here to understand that it’s very interesting. And this is how I ended up doing what I’m doing right now, real estate developments. But I had no idea that I’m going to do that.

Kathleen

So, that’s great. I love these kinds of stories where everything just evolves organically because that is how it goes. We talk about you can make plans, make plans, make plans to go overseas with a plan, or you can go overseas and make a plan. And it normally works out that your plan, even if you have one, it’s going to evolve and change as you move through life and your new place day to day.

Chapter 3: The Portuguese Real Estate Market Overview

Kathleen

So, you arrived in Portugal six years ago, that was about 2020. What was the real estate investment climate at the time? What did you find when you looked closely at the property market then?

Irina

It was a boom and continues to be increasing. But for me it was shocking, you know, like the difference in prices coming from Eastern Europe next to Portugal. It was already so high. When we sold our apartment in Bucharest, we were like only able to pay the deposit here. So, like, the difference was extremely, extremely high.

But then I realized that I understand why it’s like that because of the value that Portugal offers. Because like, we live in Lisbon and every weekend is like a holiday. We have like the ocean 20 minutes away. We can always do activities. It’s really, really pleasant.

And I think the safety is also very, very important because being in a place that is beautiful, you can find many places, but also to feel safe, to have the infrastructure to raise your family, to have all the health system, the education, everything. This comes into one place.

So, first of all, I found it very expensive. Now I understand the value, and it continues to be like that. So, we were thinking it would be a bubble. So, when we came, we were convinced that it’s a bubble, that the prices would go down. It never happened.

So, the maximum things that we had in the Portuguese market were some flattening of the prices when interest rate increased and the bank loans became a bit more difficult to take. Prices just went stagnant, but they never went down. And we are seeing this right now.

So, for example, last year the prices increased with around 17% to 18% in general. And this is like normal every year since the last five, six years. And now we are seeing a bit of stagnation, but the prices are not going down.

So, the number of transactions are diminishing, but prices are still there because it’s a huge demand, basically. It’s a huge demand and very low supply for quality houses.

Kathleen

Okay. Well, that’s a great perspective. So, that sets the stage, right? Huge demand and not enough supply.

Chapter 4: Portugal Isn’t Building Enough Housing

Kathleen

And also, Portugal is very careful about development, as I understand it, in my experience, especially along the coast. And so, there isn’t a massive construction boom going on to try to meet demand. Would you say that’s true?

Irina

Absolutely. And we know so, people who work in the industry, we know that the biggest problem that we have here, regarding supply versus the demand, is the fact that we are not building enough and we are not building enough because the ecosystem is not so welcoming for developers.

Things are changing. For sure. We are seeing improvements in the laws, in the tax incentives and so on to increase the number of development, but it’s still a bureaucratic country where you need to find your way to navigate the system. It’s slow. So, all the licenses, they can take years to get a license. So, it’s a process.

Kathleen

Yeah. You will see that everybody who comes here, they come for the laid-back lifestyle, but this comes with, you know, disadvantages. The other side of the coin.

Irina

Yeah. And it’s also the slow.

Kathleen

Yeah. Exactly. At the same time, in the context of development, especially development of the coast, I’ve always thought, you know, maybe it’s not such a bad thing that Portugal is pretty controlling, pretty restrictive. Because they don’t want to become Spain. Parts of the Spanish coast are overdeveloped, and not in a good way.

And Portugal, I think, has been very careful to avoid that. It has worked hard to avoid that.

Irina

Yeah. And I will give you an example. I was like walking around Lisbon and admiring the beautiful buildings. Everything is being renewed, refurbished right now. All the beautiful new hotels, boutique hotels, and so on.

And I was thinking this could not have been possible without the amount of restrictions that we have in the rehabilitation process and in the construction, otherwise it would become a chaos. And we know that Portugal had some historical periods where there were no rules.

And we can see that the esthetic of those cities was impacted tremendously.

Kathleen

Agreed, yeah. So, we understand, especially in the historical centers, on the coast, as you are saying, it’s extremely normal to have these rules and to kind of slow down that desire to expand, because otherwise it would become chaos and nobody would actually like it anymore.

Irina

Exactly. It would change the face of Portugal and not for the better, I would say.

Chapter 5: Is There a Real Investment Opportunity in Portugal?

Kathleen

So, how would you size up the current climate for an investor? You’ve made the point that when you arrived six years ago, you thought, oh my gosh, prices here are high because relative to where you came from in Romania, they were high.

Six years ago, when we were still very strongly promoting real estate investment in Portugal, to us, we saw prices as very, very good value for Europe. And you made the point. It’s all about what you’re buying. You know, what are you paying for?

And therefore, it’s so hard to say if something’s expensive or not expensive. It is better to think of it in context, in terms of good value or not such good value.

And for us, all along, since we’ve been promoting Portugal, we saw it as excellent value for what you’re buying, which is an Old World, the classic Old-World lifestyle at its best, with a beautiful coastline and a lot of sunshine.

So, hard to argue with any of that. And so, for an American coming from the U.S. and having looked, you know, what costs on the U.S. coast, looking down at the coast of Portugal, six years ago, or even over the past few years, okay, this is a bargain.

This can still be a bargain. So, if something is expensive or not is very relative to where you’re coming from, as you were describing.

What would you say now to someone coming into the Portuguese property market for the first time, looking at it fresh right now, would you say it’s a good buy and good value?

Irina

You can always find a good buy, good value. You just need to have the right team around you to help you out. Because of course, in the real estate, you always need to be careful.

Kathleen

Yeah, it’s always a risk there. Especially when we are talking about high values.

Irina

And it depends a lot on the profile of the investor, because, for example, we work with two types of investors.

So, we work with investors who just want a high return. And they basically invest in equity in our development. And they invest pre-construction. And at the end they just get a percentage of the profit of that development.

So, we are talking here about return on equities of around 20% per year. This is our target return on equity. This is like completely hands-off. But they don’t yet own anything. So, this type of investment is about building wealth; it’s not about preserving wealth.

Kathleen

Owning property.

Irina

Yeah. Owning property. And then, the other type of investor who just wants to preserve the wealth, and they want to park their money in good properties that will appreciate in time.

And I think Portugal is that type of country, you know, that would continue to appreciate, especially if you know how to buy good a development in a good development or in a good area. It will continue to appreciate because we are seeing the constant number of people coming here. There is no decrease in the demand of people that are moving here.

So, we see that the market will continue to appreciate, maybe not that high, like 17% increase per year, but it will continue. So, we always estimate also around 8% increase per year.

So, it’s still a good investment because you get to that appreciation and then you get the yield if you want to rent it out or you are just using it as your second house, or you just move here, you can get that yield that is not so high, that’s for sure.

We are talking about maybe maximum 5%, if it’s a long-term rental, but then you get the appreciation, the early appreciation, so you never lose the money. That’s my idea.

Kathleen

Exactly. And so, you’re drawing out great points.

Chapter 6: Buying for Personal Use vs. Buying for Profit

Kathleen

And we speak to our readers about buying real estate all the time. It’s definitely a focus in what we do, but we understand that there are two very different conversations.

One is if you’re looking to buy a piece of real estate because you need a place to live, or you want a place to live in that location. So, you’re looking to buy a home full-time, part-time, second home, vacation home, etc. and maybe you’re going to rent it out when you’re not using it, but you’re buying it primarily for personal use.

The other conversation, which is a very different conversation, is are you looking to buy real estate to make money? Just flat out you’re looking for profit, and return on your investment, which is what you’re describing and what you are offering to people, an opportunity to do in, as you said, in such a very hands-off, turnkey way.

So, what you’re providing is what readers ask us about all the time, you know, someone gets in touch every day, we hear from readers saying, I want to invest in real estate. I’m looking to diversify my investment portfolio. I want to make money, but I don’t want to have to manage a bunch of properties in other countries. What options do I have?

The truth is, unfortunately, not a lot of options. We don’t know a lot of people who do what you do.

Chapter 7: Irina’s Hands-Off Investment Model

Kathleen

And what you do, I’m going to say how I think, what you do, and then you correct me and you explain better what you actually do. But as I see it, what you do is you go out and find buildings to buy, to renovate and then flip for sale in a very short window.

That’s the other really appealing thing about what you do. You operate in a short window of a year or something and with a very interesting ROI, double-digit ROI in a short span of time.

Totally hands-off. You find the property, you manage the renovation, you then do the resales, and then you pay out your investors who provide the capital for all of that.

It’s a beautiful opportunity for someone who wants just flat out to diversify into real estate in another market.

And I would say, if that describes you, someone listening to this, that Portugal would be a top market to focus on.

Chapter 8: Irina’s New Investment Model

Irina

I will explain a bit why we were like doing this model and now we are like moving or evolving this model because we always wanted to give what’s best for our investors because this is, I come from tech startups. We always raised money. So, I know that I put my investors on board, and I try to deliver projects that they would love to invest in.

And the short time frame was one of the conditions of the investors. We want quick returns. But then, like in Portugal, the supply of old properties got diminished in the last year because it’s not only us that are doing some flips, but there are thousands of investors that are doing this model and, you know, like you are renovating these properties and there are less and less properties to be renovated.

And also, what we are seeing a change in the behavior of the buyer in Portugal. They want more and more new construction.

And after we had some experience with a longer sales cycle of fix-and-flip apartments, we said, okay, maybe this is not where the market is going. So, we need to focus a bit more on new construction.

Even if the new construction has a longer lead time of two years, not more than two years. The time frame is much more controlled because it’s one thing to promise to your investors that you are going to give them money back after two years because you know exactly how long it will take and to fulfill your word.

And the other thing to say is, it will be a short sales cycle, or it will be a short flip, and then they takes like 6 to 12 months to sell. And that adds on top of the expectation.

So, because we saw the behavior of the consumer who wants new buildings with parking spaces, with modern facilities and everything, now we are even stronger and stronger into new developments.

The last development that we have it’s a two-year development, 14 apartments, in the city center of Setúbal that is a coastal city.

And it’s much more easy to define the timeline and everything for the investors and it’s much more predictable, you know, that’s the difference.

We know for sure that we are going to sell because there is a high demand. We already see people like buying from off-plan developments. There is no competition in the market because new developments, as I was saying, is hard to do.

And it’s much more, I think it’s safer for our investors. So, that’s why we are moving into that direction, despite the fact that I would love to do the quick fix-and-flip, to continue to do that. But I cannot promise that they will continue to find the building for that.

Chapter 9: Who Can Invest With Irina?

Kathleen

You’ve had a nice track record of success, Irina, with Live and Invest Overseas investors who’ve gotten in on different projects that you’ve presented to us. So, we’ve been able to present to them for you.

And I’m excited to hear that you are evolving what you’re doing, and you’re going to continue to have opportunities, because I think it’s a great market that you’re allowing our readers to tap into in such a turnkey way.

American investors for this would be accredited investors. Would that be right?

Irina

There would need to be an accredited investor.

Kathleen

Not necessarily accredited.

Irina

We need to evaluate each situation. But my team is asking some questions, putting some questions to understand if the investor’s profile is a fit for us, you know, so that’s very important. And if they understand what we are doing.

So, it always needs to be a match between what we are doing and the expectations of our investors.

So, we go through this qualification process, but it’s not a huge thing or a blocker, let’s say.

Chapter 10: Why Portugal Is Great Beyond Investment

Kathleen

Okay. All right. Anything else you would like to share with our listeners about your experiences in Portugal, living or investing?

Irina

Well, I think Portugal is just wonderful. It really changes you as a person when you come and live here.

And I think everyone who comes here goes through a healing process, especially from the hustling culture that we, many of us have been raised to, and it’s a place that allows you to actually be, enjoy, live.

And I think for this reason, it’s a wonderful place.

Kathleen

Okay. Well, those are wonderful words, Irina, and I would agree. I have a very soft, special spot in my heart for Portugal as well. So, that’s a great way to leave this conversation.