Thursday, August 12, 2021
Dear Your Overseas Dream Home Reader,
Despite global lockdowns and pandemic, rentals in the historic town of Lagos on Portugal’s Algarve did pretty well in 2020…
With the right kind of property and no pandemic you could expect to rent for around 40 weeks of the year.
My contact on the Algarve tells me that in 2020 the average was around 35 weeks. (Chris manages a lot of rentals in Lagos and elsewhere on the Algarve. So he should know.)
It might sound incredible, but it’s actually easy to believe.
I dig deep in the world’s internationalized places for precisely this reason. We seek out those parts of the world where—no matter what happens—people always come.
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And Lagos in the western Algarve is an incredible proposition…
A walkable, safe, relaxed place…
Beaches, in different shapes and sizes…hearty local fare on the beach or the trendiest restaurant you can imagine…a historic core with a citadel, old churches…sleek cafés, craft beer hangouts…
A super peaceful and chilled out town now increasingly discovered by millions from all over the world.
This week you’ve been hearing from my scout Eoin Bassett. I sent him to the Algarve to get a boots-on-the-ground update on our RETA opportunities in Lagos. He’s finally arrived after detouring across Portugal.
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As a conservative investor I like to buy in places like the Algarve where there’s a huge mix of markets. North Europeans come in the summer, North Americans are increasingly coming to visit and live…Scandinavians escape their harsh winters to play golf and relax around Lagos…people come from all over Portugal, Spain, France…
Last year, despite the lockdown, I hear some property owners in Lagos were still pulling in gross yields of 7%.
Here’s a short video Eoin sent of one of the beaches:
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My contact Chris rents his own villa on the Algarve each summer. As lockdowns spread rapidly around the world in 2020 Chris had most of his reservations cancel.
It took him less than a week to replace every single one with new bookings.
That shows you the kind of demand. “It’s the hotels that suffered the most,” says Chris. “No one wants to go to a hotel where they have to wear masks and gloves. In an Airbnb you have control over your environment and don’t have to wear protective gear. People can drive here from all over Europe…France, Germany, Spain…”
I’ve spoken before in RETA about how I believe the pandemic is going to massively accelerate the use and popularity of vacation rentals. As we can see on the Algarve, it’s already happening…
Here’s a fact: 2019 was a record-breaking year for tourism in Portugal. 24 million tourists visited the country, causing a surge in demand for accommodation. It was the ninth year in a row that Portugal’s tourism has increased. The Algarve alone had a record-breaking 20 million overnight stays.
I fully expect the Algarve to continue on a tear when the pent-up demand of millions of wannabe tourists meets the new work from anywhere surge…
RETA members are sitting pretty in Lagos…
For instance, one member bought two condos as investment properties about five years ago for approximately €430,000 each. They rented them both, bringing in an average of about €30,000 (a 7% gross yield) a year each and recently sold one for €650,000. Those are some serious gains…
And my scout has told me that he heard on the grapevine of someone last week selling a condo for a €275,000 gain. A condo they bought just two years ago in the range of €400,000.
Best-in-class property is in incredibly hot demand. Yet, by getting in early on the right condos, we can still do very well. We just need to use our contacts and move fast when we get the chance…
RETA members have done just that and bought in several stunning new condo buildings in the best locations in town. That’s what we want in Lagos. High-quality construction and big, livable condos. Nothing cookie cutter. Nothing old or dated…
Lagos is so easy to walk around and my scout made good progress checking in on the condos that RETA members have bought….
First stop, Santa Maria where RETA members were able to get in from €310,500 thanks to a 10% discount. These are exquisite luxury two-bed condos here with home intelligence systems. I figure you’ll see 8% annual appreciation and a 10% gross yield from these two-bed condos. The developer has already put his prices up. My scout on the ground spoke to a sales agent who told him condos in Santa Maria that listed for €600,000 18 months ago are now on the market for €800,000.
My scout visited Santa Maria and took this photo of progress:
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Another great RETA recommendation was Adega, close to the marina. Adega is a short stroll to the beaches, nightlife, and everything the old town offers—these condos are ideal rentals, or to live. Many of these condos are 1,300 square feet or more, plus spacious terraces. Prices started at €348,000 ($413,358) when I last brought this opportunity to the attention of RETA and that’s a good deal for Lagos. I figure on 8% to 10% gross rental yield here.
Remember, foreigners can get mortgages in Portugal and with mortgage rates from 1% or even less you can be cash-flow positive and still get plenty of use in the spring and fall.
Lagos attracts people year-round. It’s very popular with Scandinavians who escape their hard winters to play golf and relax on the beach…even in January when the weather in the Algarve is at its coolest.
Here’s a quick video walkthrough of an Adega condo my scout sent me…
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Something important to remember: Using leverage supercharges all of our Portugal plays. Portuguese banks are lending to foreigners at incredible low rates—as little as 1% or even less—with sometimes as much as 80% loan to value. Whether you are looking for a bargain bolthole for €80,000 or a luxury villa for €800,000, you can use bank financing to your advantage.
If you’re a RETA member, today in your Alerts I’m sending you contact details for the mortgage advisor I use on the Algarve.
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More importantly, I’m also sending you a hot and urgent opportunity right at the heart of Lagos.
The kind of play that just doesn’t come around, maybe ever again.
It will go fast, make sure to check your Alerts.
Wishing you good real estate investing,
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Ronan McMahon, Real Estate Trend Alert
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