Michael's story. Investing in profitable real estate in Portugal.

Michael’s story. Investing in profitable real estate in Portugal

If someone were to ask me about Misha, I would say at once: he is a kind guy, but he has a head on his shoulders. We have been working together for almost a year now, and I am genuinely happy that there are such people among my clients. But first things first. Forty-year-old Mikhail is the owner of his car dealership, and now of profitable real estate in Portugal. He is sometimes surprised himself: only two years ago, he could not think of such a thing.

But everything starts small, and the way from an honest entrepreneur to a successful investor, six months living in Europe, began with a photo with his wife. Some people who decide to invest in Portuguese real estate come to mind suddenly, and someone goes through dozens of options before getting acquainted with the prospects up close. Mikhail is one of those cautious, cautious entrepreneurs.

I offered Misha the idea of recording a third-person narrative about him, and he agreed. He said, “If you get a chance to be the hero of a story that helps someone make the right choice, why not?” And so this dream come true story was born.

What the day ahead has in store for us
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What the day ahead has in store for us

Misha hated television, especially the news channels, even though he turned them on occasionally in the background. When you hear 24/7 about how much the government is doing for business and then find yourself immersed in a disappointing reality, you want to slam something heavy into the TV. No, he had nothing to complain about so far: due to the pandemic, people began to pay more attention to used cars, which his salon was selling. But Misha was well aware that this was a temporary flare-up of interest, and the economic situation would continue to deteriorate. A little more at this rate, and even an old Zaporozhets would not be enough for everyone.

With this thought, he turned off the TV and got up from his desk in his small home office. He felt like stretching his legs and gathering his thoughts. More and more often Misha thought about investing in something more than just ordinary apartments in the Moscow region. And about partially transferring his business abroad. The ruble was falling rapidly, and the tenants of one of the premises had lost their solvency. Mikhail was in their position until the very last: he lowered the rent slightly and offered a grace period. But when the father of the family lost his job, they simply gave up the rented apartment themselves and left their parents in the village. Misha understood them perfectly, but such a tendency strained them.

He went down to the living room of the country house, where his wife met him. Tatiana was a housewife while she was raising their children, but she supported her husband in everything and tried to help with advice. Today her mood was better than his, and the woman decided to please her husband with the news: her friend had flown to Portugal with her fiance and sent her stunning pictures of the coast. Misha, who used to be happy for others more than for himself, appreciated the pictures. And indeed: a stunning sunset, picturesque nature, neat well-kept houses. It would be nice to spend a week there, too, sending the children to their grandparents.

But he put the idea aside and forgot about Portugal in half an hour. He could not know what the market situation would be tomorrow, so it was better not to take a vacation, especially since he was thinking about expanding his business. The question of investments did not give him any peace either. If he was going to sell his idle property, he better sell it quickly – what if it depreciates? But it is not without reason that they say: if you rush, you make fun of people. Being a big fan of this saying, Misha wanted to approach the issue as consciously as possible.

He spent several days thinking it over. Now Mikhail was firmly convinced: leaving everything as it is is not an option. The money accumulated over nearly 20 years of business should not lie as dead weight, and an empty rented apartment – stand idle. The capital should bring a stable income, and preferably a passive one. After all, children need a father, and the business can not do without the owner, who is always on guard. But what exactly do you need to do?

What if...?
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What if…

Old friends at Misha’s house were always welcome. But this time Misha’s house was visited not just by a good friend, a guy he grew up with in the same neighborhood. Then their ways parted: Denis joined the army and Misha entered a good college and made new friends. They kept in touch at first, but then it quickly faded: everyone had their own lives and then families.

A conversation over a bottle of good wine seemed to veer in the right direction: Misha confided that he wanted to sell one of his apartments outside Moscow and that he generally planned to develop the business, but had not yet figured out what to invest in. His childhood friend immediately perked up and frankly confessed: in fact, he didn’t just come to visit Misha, but wanted to make him a business proposition.

It did sound tempting: Denis knew a man who could arrange a supply of inexpensive used cars from Europe. According to him, most of them were already in good enough condition that only cosmetic repairs were needed before they could be sold. Misha thought about it. It would take a lot of money to buy them now. Maybe he should take a risk and invest it. At first glance, the deal promised to be profitable. Without giving his comrade a definite answer, he promised to think it over.

After dinner the next evening, when he told his family about everything, his wife shook her head. She said, “That Denis of yours is a real bug. “Zook!” – repeated after her mother, the youngest daughter. Misha only sighed in response. Doubts gnawed at him himself. An old friend can’t cheat, but then why did he feel in his heart that he would do the wrong thing if he agreed? No, it’s too risky. What if the cars are actually from serious accidents and it’s simply dangerous to sell them even after repairs? It would kill his reputation, and Misha didn’t even want to think about the people who might get hurt.

He apologized to Denis but refused. This incident with his friend sobered Mikhail up: if he wanted to provide a decent life for his family, he needed to move. Find a sensible manager, who can cope with his duties in Russia just as well as he can, and develop the business in Europe. But to start with, you have to invest in something to earn a stable passive income abroad.

Of course, at first, it will be more difficult there, my wife and children will have to get used to an unfamiliar language. But it is better to move now, while Antosha and Lisa are very young. The sooner he starts building relationships with people abroad, the more likely he will succeed. Especially since Misha did not see as many prospects in the Russian market as he did in Europe. So the risk was worth it? So he started looking at different options.

Investing in profitable real estate in Portugal. Searches and disappointments
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Investing in Income Real Estate in Portugal. The Findings and Disappointments

Endless browsing on the Internet, talking to acquaintances, to friends or acquaintances who had experience, and then to the acquaintances of those friends. And again, twenty-four hours on the Internet, in various investment-related forums. It seemed to Misha that he would be able to advise people on passive income abroad. But, no kidding, after all these conversations and searches, he started leaning more toward European real estate.

An acquaintance told him about life in Italy. Of all the aspects of her story, the thing that confused Misha the most was that the car business in the country was somehow not very good. Of course, in Russia, you can’t get much success in the long run either, but the local market seemed much more predictable. However, it could not be that bad, and Mikhail decided to study everything thoroughly before making a decision.

Tanya’s university friend told the story of his cousin, who had managed to settle down in Barcelona and sent his family postcards every six months. Misha liked this option. In Spain, you can buy inexpensive real estate on the secondary market, renovate it, and sell it at the price of the primary residence. Or make money from the tourists that come to live in the capital. He mentally noted this to himself, but he did not stop looking.

Through one of his subordinates, Misha arranged a meeting with a guy who moved his family to Cyprus. The living conditions seemed acceptable to him, and the car business was not as dismal as the European average. But Misha was frustrated by the high profitability of the housing. He still wanted to make the most of the move for himself and his family.

The experience of the man who moved to Germany from the forum was very appreciated by Mikhail. An apartment in Berlin, rented out, could be a source of stable income. Especially if you buy “dead” housing at a low cost, repair it, and resell it at a higher price. But here, too, the automobile market was going through bad times.

Another acquaintance told me about moving to Malta. Misha ruled that option out at once. He was planning to rent out the house anyway, and foreigners are not allowed to do that. Despite the good prospects for the growth of real estate prices, he did not want to give up his monthly passive income. That was the end of the interesting stories.

Misha listened to everyone very carefully and made a few notes for himself. But the more he immersed himself in the subject, the more he realized: the automobile business is not the most promising in any of the countries where he would like to live. So he had to reconsider his views and explore his options from a different angle? Say, look for a facility that could be turned into a hotel.

Misha decided it was better to give up the idea of moving the car showroom. He could manage it remotely in Russia, and there are much more promising destinations in Europe. No matter how much he loved his business, he had to think about the well-being of his family first. And the easiest way to make money here is to find a place attractive to tourists at any time of year and invest in real estate.

First Landmarks
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First landmarks

Of all the options Misha was most attracted to Spain and Germany, and he also noticed France, about which he had read a lot in his youth. And dreamy and romantic Tanya would be happy to live near Paris. Still, it even sounded prestigious, and the standard of living in these countries was much higher than in Russia. Spain has a warm sea and resorts, and Germany is one of the most popular tourist countries. If you buy a house, which tourists will then rent, or a small hotel with a good location, the investment will not only pay off, but it will quickly start generating income.

And he began to study and compare, all the same thoroughly. He looked through websites with different offers, consulted with knowledgeable people, and weighed the pros and cons each time. But Misha was not lucky: time after time it turned out that reality and expectations did not practically overlap. His acquaintances who had moved in 5-10 years ago promised him a quick payback, but the profitability of the market was not impressive: only 5-7% per year.

In addition, all of the areas that appealed to him were popular with other investors. That is why all the houses and hotels meeting the definition of “renovate and sell at a higher price” were either already sold out or located so unprofitable that there was almost no point in investing in them.

There was another “but”: Misha was not familiar with the legal intricacies of buying real estate in any of the European countries. And most of the agencies he went to for advice did not explain anything. The question of restoration also remained open: if he succeeded in buying and legalizing overseas real estate, who would do the repairs? He was not familiar with the construction services market in Germany or Spain and ran the risk of contacting unscrupulous workers or overpaying.

Misha left requests one after another, choosing from more or less acceptable options. But no one promised to take on the search for builders, not even at extra cost. Misha did not want to fly into the unknown. Even though he had already sold the apartment near Moscow and roughly calculated how much he could spend on the deal, the habit of not throwing money away had not gone anywhere.

No one knows how long Misha’s search would have lasted, but the next weekend he and Tanya were visited by that traveler friend. While talking about children, plans, and work, they quietly came to the topic of overseas investments. The girl became very excited and told him how many tourists there are in Portugal, what a good climate it has, and how many Russians are moving there now.

Misha started to think. Portugal is not France at all. But it was still Europe, and the proximity to the ocean was appealing. But did Tanya’s friend understand much? After all, she was an artist, not an entrepreneur, and beautiful landscapes would confuse anyone. So he decided to delve into the question, albeit more out of boredom while waiting for answers from the chosen agencies.

Plans change
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Plans change

Michael spent the next week exploring everything related to Portugal. It’s hard to say how many kilometers of text he had to read until he came across one of the websites with a real estate catalog. But it was worth it. By this time Misha had a rough idea of how much the average cost of housing in different parts of the country, where most often invested, and how much can be earned on it, say, for a year.

But it only gets better and better. Misha finally made up his mind. He is not just going to buy real estate and wait for it to make a profit. He would spend the first five years in Portugal without selling it so that he could get a second citizenship. And then, when the value of the house goes up, it will be possible to find a buyer, get a decent sum of money, and invest in the hotel business in a big way. During this time he would have time to get used to the new country and get used to its rules.

Now the previous stage was to be repeated: negotiations with agencies. And my goodness! In Portugal, things were better with the “turnkey” options. However, most of the offers required personal presence, and Misha preferred not to fly anywhere until he was sure he would buy the property. Only one agency could solve his problem remotely: MoveToCascais. Our hero decided to choose it.

Trust, but verify. After the situation with his childhood friend, Misha almost considered this a commandment. And how can you check whether you can trust an agency in another country? Fortunately for both parties, there were reviews about work of MoveToCascais in the web, and Misha did not notice anything negative in them. And he decided to make sure at once that his plan could be implemented and make good profits.

At the agency, he was told about how the purchasing and legalization of the property would be done. Misha also asked about the tax situation. Fortunately for him, the tax regime in Portugal allowed him not to pay twice for doing business in its territory and Russia. This only convinced him of the right choice. Mikhail was pleased with the guys’ approach: they promised to help with the purchase, find workers for the restoration work, and in 5 years – a new buyer. Compared to the rather vague answers of those who advised him about France and Spain, a lot became clear immediately.

And then there were negotiations, introductions to lawyers who would handle his business in Portugal, trips to the car business, again online negotiations, and conversations with the guys from the agency. And all this at such a crazy pace that Misha fell asleep as if on cue, as soon as his head touched the pillow. A month or so passed, and it was time to make a final decision about the object of investment. After all, the Portuguese restoration market had more than one house to choose from, and more than ten.

Investing in income property in Portugal. Long deliberation and a decisive yes
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Investing in income-producing real estate in Portugal. Long deliberation and a strong “yes”

Misha moved on to math. The calculation was based on the entire amount that had been accumulated over the years of doing business and was waiting to happen. Added to it was about 120 thousand euros from the sale of a spacious two-bedroom apartment in the Moscow suburbs. It wasn’t that little, but Misha understood that first, it was necessary to buy something small, to feel out the ground, and not to risk everything at once. And only then to dive headfirst into the hotel business, if things go well.

So he chose a nice cottage for two families, built near the ocean near Cascais. For short-term rentals during the season, it is a great option, and in the cold season, it is quite possible to reduce the price a little and rent for a longer time. At first, Misha had the idea of providing relatively inexpensive accommodation around Coimbra for students. But, since his initial task was to get VPV for an investment in the profitable property of Portugal, to multiply the capital within 5 years, to obtain a second citizenship, to sell the property and invest in the hotel business, he refused it.

The cost of the acquired housing was 500 thousand for an area of about 200 m2. Another 100 (with reserve), according to Misha’s modest calculations, should have been spent on its restoration. The total is 600 thousand euros of expenses. No serious overhaul was needed, but he was used to doing everything thoroughly and planned to make good money, so he didn’t skimp on the comfort of future tenants. And he was right: for a night in an apartment of this level, tourists were willing to pay 200 euros. Given that the housing is designed for 2 families, came out to 400 per day in the season. After consulting with the guys from MoveToCascais, Misha realized: the season – about 60% of the year, if we exclude the cold winter, early spring, and late fall.

This meant that tourists would bring in about 87,600 euros a year. After dividing that amount by the initial 600, Misha realized that the return on investment would be about 15%, and probably more. And this is without taking into account the fact that the cost of housing after the renovation will increase by an amount greater than the cost of restoration, as well as an increase due to the general increase in real estate prices in the country. Forecasts on this account, by the way, were very favorable.

So far, it was difficult to say how much profit the sale of the house would bring Misha in 5 years. Even taking into account the trends that were being observed. But one thing was certain: investors would willingly buy the building, because it would be a beautiful old house, outside representing historical value, and inside – modern and comfortable. If it can earn at least 10% of the investment per year without the active participation of the owner, such an object will be in demand among buyers.

Of course, all these calculations were given without taking into account taxes. But experts from MoveToCascais convinced Misha that they can reduce them to a minimum. So no special role this figure in the final percentage of profit from the use and sale of real estate will not play. They also promised to exempt him from the subsequent sale tax: local laws allow it.

Misha studied the documents up to and down, and then made a decision: the deal must be done. Amidst the pandemic, which had screwed up everyone’s life, the deal was done remotely. The contract with the contractor was signed without Misha’s presence. A large-scale renovation began. Of course, for the time being, the apartment could not bring him any income. But Mikhail decided that it would be useful to spend some time in Portugal with his family. By then he had already found a manager for his car business and introduced him to the business.

A couple of months later, he flew to Lisbon with his wife and children: to relax on the ocean coast and see what was up. And to get to grips with the new Portuguese apartments. By that time the repairs were completed, but for the time being the only beautiful things inside were the walls, freshly painted in pleasant azure color. And the living rooms and bathrooms began to be filled with furniture, decorations, and other important little things. It wouldn’t be long before the first tourists would settle in these walls.

In the meantime, Misha could admire the restored facade and the nature around him. And gradually learn about all the nuances of the hotel business around Lisbon and other Portuguese cities. After all, there was no reason to think he would fail.

Where dreams lead
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Where Dreams Lead

And one morning Misha found himself on the shore of the Atlantic Ocean. It was a strange sensation, for someone used to severe Russian frosts would find it hard to believe that the climate could be much milder and pleasant. And after the Moscow air, it is especially easy to breathe here, among greenery and surprisingly comfortable houses. But he could say with confidence that for the first time in the past 10 years he felt confident about the future.

The children were slowly getting used to the place, although the older son found it difficult: he had just begun to get used to the Russian school, and there were such changes. But Misha believed that Anton had his genes, which means he would be able not only to learn an unfamiliar language and make friends with everyone but also find advantages in the move. Meanwhile, my wife introduced the children to their peers, the kids whose parents also moved to the neighborhood of Lisbon from the CIS countries. And the joyful hordes of kids were getting to know the new and wonderful world.

And Misha, when I called him, first said that he had to think about it, and then he agreed. Even though happiness loves silence, his story can inspire confidence in someone. And that means one more happy person in the world, if not an entire family.

Moving to Portugal in 2022