Saturday, 02 October, 2021
Dear Dream Home Letter Reader,
“Mission Italy” continues…
My scouts are on the final leg of their journey and are now compiling their findings into one comprehensive report.
Here in Portugal, however, I’m calling it V-Day…
As I write, I’m in Lisbon, just an hour from my home, and the site of an impending crash.
Getting here from my base on Portugal’s Silver Coast is a breeze. I hit the highway, straight south, and then GPS takes me all the way to my hotel in the heart of old town.
It’s only 45 miles away but temperatures are noticeably warmer down here. I left a wild and fresh 68 F, with a fall-like chill rolling on the breeze, and arrived in warm sunshine and 82 F.
I’m here to check in on the state of the Lisbon market, catch up with some contacts and pick up my parents who are visiting for the next two weeks.
I’ve barely dropped my bags and I’m checking real estate prices…
$300,000 for a so-called apartment that’s smaller than most hotel rooms. Asking prices are still crazy high, but a different story might be playing out off-market. I’ll do some digging to find out what the connected are buying and selling for.
I called for a crash in Lisbon in March 2020. The house of cards hasn’t come down yet, but it’s getting close.
Prices are far too high to be sustainable. And with pressure coming in from the bureaucrats in Brussels to curb the Golden Visa, prices here could plummet, and perhaps create a new buying moment for us.
One wonders how long it can sustain itself now that the flocks of tourists are no longer arriving…
Here’s a short video I shot:
Portugal is small but it hosts a remarkably diverse range of real estate markets, each at various states and stages.
I’m bullish on the Algarve because it’s positioned to do extremely well from the accelerating trends we’ve seen over the past year…remote work, pent-up demand for travel, changing lifestyles.
Lisbon, on the other hand, is set to do very badly because a Golden Visa and ill-informed speculation bubble drove prices too high. Now it’s teetering…and I’m positive it won’t take much for it to fall.
Over the next few days, I’ll continue to dig into the market. First, lunch with some friends, old and new, in my Hotel da Baixa restaurant.
We dined al fresco on the street at the back of the hotel. One new friend is here to explore how he can get his clients (he is an international lawyer) into the Golden Visa program before the dramatic changes come into being at the end of this year, which will exclude Lisbon from eligibility. Longtime friend and my contact from the Algarve, Chris White, joined us too.
“There’s been some offers and expressions of interest on the Vale do Lobo apartment,” Chris tells me.
To remind you, Chris and I snagged a bank repossession in Vale do Lobo, a top tier resort community on the Algarve, at bargain basement prices and no money down.
I’m curious to find out what kind of gains we could be sitting on, so I press him…
“We had a low-ball offer which I dismissed,” says Chris. “This party is open to a counteroffer, and someone else also wants exactly what we have.”
We paid €410,000 and then put €37,000 into furnishing it and tarting it up. Plus, we had closing costs of approximately 6.5%. An identical one lists for €830,000, which in my opinion is high.
I told Chris I’m open to selling. It just feels greedy and bad karma to pass up huge and fast gains like this. If the right offer doesn’t happen, we stick with the plan to rent for a few years, build up the income stream and then sell…
This conversation took no more than 10 minutes and zero emotional investment. I made the buying decision in about 30 seconds. The selling decision took only a few more, as I had to open the calculator on my phone and add up how much we were into the deal for.
Up on the Silver Coast, my wife and I have had such a positive experience there, it has rendered our other plans redundant.
The original plan was to use our condo in the Praia D’el Rey resort community as a base in the spring and fall. But now we like it so much up there we plan to make it our primary base. That means it’s Home (with a capital H). Not just one of our part-time bases.
That means less time in our Mexico bases, less time taking in the Irish summer, and more time putting roots down. We want a garden, fruit trees, a proper office space…our condo just doesn’t meet the new criteria.
In retrospect, maybe we should have planned for success. But, we put one foot in the door…everything worked out better than we hoped…now we want to jump in with both feet.
The beauty of buying well in real estate is that you always have flexibility. We aren’t tied to the condo. We could easily sell it for more than we paid, but we don’t want to. It’s not a burden. And over the summer, the tenants we get in pay for its entire years’ mortgage.
I like it, and I like having it. Who knows, our plans could change again when my 10-year low-tax period ends. (One of the perks of qualifying for Portugal’s Non-Habitual Residents (NHR) tax regime.) It can be turned into a rental and guesthouse for visiting friends and family. Or rather than travel for my golf vacations, I could bring my golf trip buddies to me.
In the meantime, we’ve been house hunting…and we’ve had an offer accepted.
It’s a home that offers privacy, space, and a great big pine tree…a large open living space opens to full-length terrace with fabulous views of the Lagoa de Óbidos, a tidal saltwater lagoon, surrounded by headlands. The kitchen has great views to the water too…and the master bedroom to a beautiful pine forest. Downstairs is an 1,800-square-foot blank canvas currently in use as a garage that opens up to the pool area.
We’ll convert this to an office, exercise room and a guest suite—and it’s just four minutes from golf. It’s not a pocket money buy but the rental income from one of my RETA deals (I bought in) alone will cover all the costs including mortgage.
I don’t want to say much more, for now. As I write, my engineer is on site doing his investigations. I’ve had mortgage offers with rates as low as 0.6% and I am getting my paper work together.
Fingers crossed we have no bumps along the way. If there are, and we don’t get this house, there will be others.
It’s been an eventful few days with my recent Portugal investments, both financially and personally.
In real estate, as the old adage goes, we make our money buying. But we also give ourselves peace of mind when we buy well…because when you are ahead from the get-go you have options.
Wishing you good real estate investing,
Ronan McMahon, Real Estate Trend Alert
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