Renting out your Holiday Home in Portugal - What you need to know
Although many families buy a property in Portugal as a permanent home to enjoy the wonderful climate and lifestyle, others opt to use their Portuguese property as a holiday home. In some cases, this option is also used by international homeowners in Portugal to maximize their real estate investment through holiday home rentals.
For those who are currently searching for a property for sale in Portugal for this purpose, rest assured that this is an opportunity to maximize your investment during the breaks when you or your family are not using the property. Renting out your holiday home not only makes owning a property in Portugal more affordable, but also guarantees a steady long-term income.
Why rent your holiday home in Portugal?
Portugal is currently one of the world’s favourite holiday destinations. According to official data from Turismo de Portugal, in 2019 the tourist accommodation sector in Portugal (which includes Hotels and residential lodging) recorded 27.1 million guests (+7.9% compared to 2018), of which more than 16 million were foreigners, and 70.2 million overnight stays (+4.6%, compared to 2018).
Although the Algarve was the region that recorded the highest number of overnight stays - 20.9 million - it was not the region with the highest number of guests, which reveals the increasing interest in other regions of Portugal, namely outside the peak season (July and September).
In the last few years, Portugal has been receiving an increasing number of visitors during the winter months, namely European retirees who enjoy the milder winters. And although rental proceeds are much lower between October and April, longer stays are an excellent way of maintaining rental income during those quieter months.
If renting out your holiday home in Portugal is something you are currently considering, Relocation Specialists have joined their 5 top tips to secure higher rental yields and enjoy a hassle-free homeowner experience:
Tip# 1 - Find the right location
According to Dylan Herholdt, Sales Director at Portugal Realty, “buying a new property near the beach or with sea views is a sure-fire way to guarantee your holiday home in Portugal will always be highly sought after”.
“Although Portugal has so much more to offer than just beautiful beaches, statistically holiday home rentals tend to be more popular near coastal towns. My advice to clients is to search for a property in a location that appeals to their lifestyle and personal taste, especially if they intend to use it themselves for holidays or as a permanent home in the future. They should also seek guidance about what is important in the market that they are renting. If they can match what they love with a location that is popular for the local market, all the better”.
Dylan also recommends that investors choose new build properties, with bright, modern interiors and access to a pool, as these are the characteristics that guests value the most. “Portugal is known for its sunshine… no one wants to spend their holidays in an apartment or villa that is dark and outdated! Older properties are charming and lovely to look at but are not nice to use and local people are aware of this”, adds Dylan.
Tip# 2 - Furnish and decorate accordingly
Another aspect that is crucial to the success of your holiday home in Portugal is the furniture and decoration.
According to Allenah Tereso from Portugal Interiors, "the first contact that potential guests will have with your property will probably be through online photos. However, do not make the mistake of choosing items simply because they ‘look good’. Holiday home interiors must be of high quality because the wear and tear will be much greater than that of your own home".
"When choosing furniture and decor for your holiday home, make sure that each item is not only aesthetically appealing or modern, but also made of durable materials that can stand the test of time. These should also be easily and quickly cleaned in order to meet hygienic standards", assures Allenah.
“At Portugal Interiors, we have experience in the hospitality sector and know exactly what type of furniture and decor our homeowners need to guarantee the success of their holiday home rentals”, explains Allenah, adding that choosing a complete furniture package is often the option of choice for international investors as it saves them time and hassle.
Tip# 3 - Invest in professional marketing tools
Sandra Filipe from SCH Holiday Homes considers that the quality of the property should also be present in the way it is promoted online.
Regardless of whether you invest in your own website, social media pages or holiday portals, it is important to convey a professional image. Sandra believes that "professional property photos that are appealing will capture clients’ attention, but it is the overall client experience that will truly make a difference in the long term”.
The aim of professional marketing and rental management companies such as SCH Holiday Homes is to take care of all the details - and there are many! - that are currently part of the holiday home sector. “Nice photos are mandatory, but certainly not enough! Allowing instant online bookings or more flexible ways to check-in and out are two examples of how we make the client experience more positive and simple. In today’s competitive rental market, providing this type of service is key to guaranteeing higher bookings and client satisfaction rates, which in turn provides higher rental income”, explains Sandra.
“If you don't have the time, aren't physically in Portugal or simply don't want to do this yourself, I highly recommend trusting your holiday home to a professional rental company. Not only will you have more peace of mind, you will also get better results!”, guarantees Sandra.
Tip# 4 - Save time and hassles
Managing a holiday rental home is very time-consuming and, for many homeowners, this might be a major barrier when deciding to put their home on the rental market. There is also the issue of the potential risks that comes with letting strangers into your home.
The good news is that the time factor and possible damage do not have to be your concern. Currently, Portugal has a number of professional property management companies that provide homeowners total peace of mind.
According to Graça Rosa, from SCH Solutions, trusting these services to an experienced property management team will save you time and any sort of nuisance. Basic property management services can include anything from property checks to mail collection, pool/garden maintenance, general home repairs or cleaning and laundry services.
“Should any issues arise with our homeowner’s properties, we will take care of everything. Our goal is to ensure that each home has everything perfectly functioning and is clean and fresh when our clients or their guests arrive”.
On the other hand, property management companies will also help you comply with legal requirements, such as registering as a tourist rental accommodation and obtaining a rental licence known as “Alojamento Local”.
“Portugal has increased its efforts to eradicate illegal holiday rentals. Nowadays, it is practically impossible to let out your home without complying with the law. Simple things such as having the correct safety inspections and certificates, a fire extinguisher, a first aid kid or an official complaints book, known as a ‘livro de reclamações’, may sound complicated, but our clients do not have to worry about any of this as we take care of everything”.
If you do choose to manage your holiday home in Portugal by yourself or with the help of a friend or family member, make sure you keep up to date with all the legal obligations that are constantly changing! Simple things such as not including AL signage on your property can lead to high fines.
Tip# 5 - Meet all legal and tax requirements
As with everything in life, when it comes to meeting legal and tax requirements, it is better to be safe than sorry.
When choosing to let out your holiday home, one of the first steps to take is to ensure everything is done safely and legally. Namely by obtaining the correct licences and safety certificates, as well as making sure you have trustworthy accounting services that will guide you in correctly paying your taxes in Portugal and making the best decisions to avoid pitfalls.
Because tax on rental income in Portugal must be paid in Portugal, whether you are a resident or not, it is important to have a reliable accountant help you understand the ‘ins and outs’ of renting your holiday home.
Sofia Cardoso, a senior accountant at Portugal Accounting, has several years of experience in assisting international homeowners to make the best financial decisions regarding their holiday home rentals. “Although rental income can be very attractive, not everything is profit and there are several expenses that homeowners must consider. These include property and IRS taxes, which must be fully complied with to avoid heavy fines”, recommends Sofia.
In addition to specific licensing requirements, other legal obligations to rent out your holiday home in Portugal include registering the entry, exit, and identification details of all foreign guests and reporting these details to the Portuguese emigration office (SEF). The easiest way to do this is to register via the online portal offered by SIBA - Sistema de Informação de Boletins de Alojamento (unfortunately, the website is only in Portuguese but most rental management companies will also take care of this for you).
What the future holds for holiday home rentals in Portugal
Before the coronavirus pandemic put a brake on tourism, Portugal was one of the world’s fastest-growing hotspots, registering a record-breaking number of visitors every year and wining several world tourism awards.
With the steady ramp-up of COVID-19 vaccination rates across Europe and the EU Digital COVID Certificate programme rapidly kicking in, it is expected that the number of foreign visitors to Portugal and domestic tourists will quickly recover the pre-2020 figures.
If you’d like to know more about renting out your holiday home in Portugal, contact a relocation specialist. Now is a really good time to prepare your home in time for the freedom to travel that we are all dreaming of!
SCH Solutions - The complete solution for your property investment in Portugal
SCH offers its owners a tried and tested Holiday Rental Program, controlling multiple listings from one centralised platform that significantly increases the visibility of a property across the most relevant rental sites. Contact SCH's team to schedule an online meeting, a visit or request a free quote!