Whatever your reasons may be, the fact remains that the property market is still one of the best investments available and one of the best options for your spare money.
One of the main reasons that as an investor you would get involved in the property market is to make a return on investment, and ideally, to create a passive income, and this can only be acheived through rental income.
There is no doubt that a passive income is very attractive - who doesn't want to be making an income with no effort or with minor effort?
But how do you achieve this?
You do so by investing in property, where the rent received outweighs the running and finance costs over a period of time. And if you get into the property market as an investor, it is always best to do so when the market is down. And there is no doubt, that the best time to buy property is now!
The property market is at the bottom of a price downward spiral, even in the Algarve, where properties value have just adjusted to the real market conditions, unlike some other European regions that has seen a dramatic decline in property value. This means that you now have the opportunity to pick up some real gems at a fair value.
But you are probably saying to yourself, although you would love to buy property and can see the value of doing so; you just don’t have enough capital to finance it yourself.
In this article we look at alternative ways to purchase property as an investment in spite of your lack of financial resources. All it needs is for you to think outside the box, chat to friends and family members or even run an ad looking for partners in this venture.
Most people are typically frustrated with the reality that a 50 000 Euros today on it’s own does not easily buy you a nice investment property, capable of providing a solid monthly return. We talked to and interviewed many hopeful buyers just like you, and one common problem we encountered, is people wanting to buy properties but they do not having sufficient funds to do so. Another fallacy, is that many buyers believe that the banks will lend them all the money they require.
Yes, banks may provide you with finance, if you can provide security for much more than you are lending. The problem then, is that you find yourself with very high monthly repayments, linked to high flexible interest rates!
The correct way to buy a property is to have enough cash for the purchase. But most people do not have that type of financial resource on hand.
So how can you manage to buy a decent property while you do not have sufficient cash?
The answer lies in creating a consortium with a group of friends or family members, that purchase a property together using the cash available between them. But what is a consortium you may ask? It is a company that is registered as a property investment venture. In short think of it as a small business. If you follow this process and to safeguard all the investors you do register a company, but make sure that you have a legal representative draft a shareholders agreement detailing all the terms and conditions.
What are the benefits?
- You are spreading the risk.
- It is easier to sell a share in a company than selling a property at full value. You may sell your shares to other shareholders or new investors.
- Joint management! Joint responsibilities! Joint sharing of liabilities!
- Much less capital is needed to build your property portfolio.
- No bank loans - No huge debt and interest repayments!
I am sure that by now you are asking yourself:
- So, what type of properties could you invest in?
- And what would you return on your investment be?
Property One – Asking Price 1,400,000 €Luxurious villa with unique modern design situated in a truly idyllic location directly in front of the Porto de Mos beach overlooking the sea. Plot: 530m2. Construction area: 440,60m2. Comprises of: Spacious living/dining room with open plan kitchen, 4 Bedrooms, Office/bedroom, 4 Bathrooms, laundry, storeroom, large varanda with built-in BBQ, heated swimming pool, enormous basement.
Living/dining room and all bedrooms have spectacular sea views and direct access to the swimming pool. Jacuzzi in main en-suite bathroom. Easy-to-maintain garden with automatic irrigation. Air conditioning, Central heating, Satelite T.V. A very spacious 203m2 basement/garage which will fit 4 or 5 cars. With elevator which takes you from the basement to the top floor. This villa is still under construction. Excellent Letting Potential.
You could set up a company that would purchase this property where each investor would have the benefit of one month usage per year. Or where the letting potential could be shared between all shareholders.
Letting potential for this property is between 1,500 and 2,500 Euros per month on long-term rental. Or if you choose to let it for the high season you could generate between 30,000 to 40,000 Euros in holiday rentals and you could share the use of the property for the remaining of the year.
Property Two – 499,000 €Living room, fitted kitchen, 3 en suite Beds, WC, Laundry, Garage. Spacious garden, Swimming pool, BBQ, Covered terraces. South/West facing. Land area: 1.002 m2. Construction area: 220 m2. Built in 2010/2011. Alarm system, air-conditioning and under-floor heating installed.
Small urbanization located between Porto de Mós and Ponta da Piedade, close to the Porto de Mós and Dona Ana beaches, only 20 min walk to the town centre.
NOTE: this villa is finished to high specification, but within the asking price. The following items are not included: air-conditioning units, heat pump and solar panels, automatic irrigation, nor pump, filter and electric panel for the pool.
Letting potential for this property is between 750 and 1250 € per month on long-term rental. Or if you choose to let it for the high season you could generate between 10 000 / 15 000 € in holiday rentals and you could share the use of the property for the remainder of the year.
Property Three – 250,000 €Situated on the Lagos Marina with stunning marina views. The apartment comprises of: Entrance Hall, Living/Dining room, equipped kitchen 2 Bedrooms 1 Bathrooms. 2 Private parking spaces in underground garage. 24 Hr security . Acess to pool & gymnasium optional. With underground garage parking for 2 vehicles.
Letting potential for this property is between 600 and 1000 € per month on long-term rental. Or if you choose to let it for the high season you could generate between 5 000 / 10 000 € in holiday rentals and you could share the use of the property for the remainder of the year.
Other things to keep in mind
When considering purchasing any property within a property consortium, your consortium would need to add the following costs to the purchase price of the property:
- Property transfer tax (IMT) between 2% and 15% dependent of where the company is registered
- Stamp duties and taxes (0.8% of purchase price)
- Surveyor’s fee, if needed, is subject on the value of property, but is normally in the region of 0.5% of value of property
- Legal fees are between 0.5% to 1% per cent of the purchase price for an average property.
- Allowance for Valuation
- Allowance for Provisional registration
- Allowance for Final deed registration
- Company registration fees.
- Company legal and accounting (auditing) fees.
There are many local teams that can help with assisting you in finding the right investment properties in the Algarve and Marcela Properties in Lagos is one of them.
So in summary, this is an excellent opportunity to purchase high yielding properties, which will produce a very strong positive monthly income - giving you a huge return on your investment through a strong passive income, while you can opt for co-sharing the property during the year or to use it just as a long term investment.
As you can see it is easy to own property. Just create your own property investment consortium and start investing for your future.