There are a few different investment methods that qualify an investor for the Portugal Golden Visa. Among these, real estate acquisition is the most popular one by far.
However, within the real estate acquisition module, there are multiple available options. You can either get a property for 500,000 Euro or choose to go with an urban rehabilitation option, where the minimum investment value drops down to 350,000 Euro!
As its name suggests, the objective of this option is to promote urban rehabilitation and offer the investor a series of benefits for contributing to the renovation of the property in return. In this article, we will dive deep into the 350,000 Euro real estate option of Golden Visa Portugal, its advantages and disadvantages.
Golden Visa for Real Estate Investment
According to data provided by SEF (Portuguese Foreigners and Borders Services), Portugal granted more than 9,200 Golden Visa applications between October 2012 and September 2020. 94% of these applicants chose to go with a real estate investment route.
Real estate is by far the most popular investment route in the Golden Visa program. However, what many people do not know is, there are two different forms of real estate investment methods that qualify for the program. The two methods are quite different from each other in many aspects, including the minimum amount of investment required.
Classic Real Estate Investment vs Urban Rehabilitation Real Estate Investment
“Classic” real estate investment for Golden Visa
Initially, the Portugal Golden Visa Program provided only one form of real estate investment to qualify for the residence permit. It was the acquisition of real estate with a value equal to or greater than 500,000 Euro.
In this “classic” type of real estate investment, it does not matter whether the investor buys one or more properties, whether these properties are new, restored or old, or even where this property is located within Portugal, as long as the purchase price exceeds 500,000 Euro.
Urban Rehabilitation real estate investment for Golden Visa
In 2015, the Portuguese government made an amendment to the Golden Visa program, providing an additional form of real estate investment. The details of this investment method are:
Acquisition of real estate, which must be constructed more than 30 years ago or located in an urban rehabilitation area. The acquired property must be rehabilitated in accordance with the municipality regulations. The total amount of the property purchase price and the renovation works must equal or be greater than 350,000 Euro.
Taking into account the “extra effort” that is needed to execute this investment method, the minimum investment amount is significantly lower than 500,000 Euro, at 350,000 Euro. We will repeat: the 350,000 Euro minimum amount includes the property price + the renovation works.
Note: If the subject property or properties are located in “low density areas” within Portugal, then the minimum investment amount is reduced by another 20%, bringing it to 280,000 Euro.
Rehabilitation Real Estate Investment Requirements
The main requirements of the 350,000 Euro rehabilitated real estate investment route for Golden Visa Portugal include:
- Property Requirements: must be constructed over at least 30 years ago or the location must be an Urban Rehabilitation Area,
- Rehabilitation/Renovation Requirements: property renovation activities must be evidenced by work contracts,
- Purchase Requirement: the proof of property acquisition, free of charges, must be submitted,
- Minimum Investment Amount: 350,000 Euro should cover the property amount + the renovation activities
The property can be acquired on a joint ownership basis, as long as the share of the Golden Visa main applicant covers 350,000 Euro. Conversely, multiple properties can also be purchased for 350,000 Euro by the main applicant and it would still qualify for the program.
Advantages of 350,000 Euro Real Estate Rehabilitation Option
With this particular investment option, Portugal aims to continue attracting international investors to its real estate market, while promoting the restoration of old properties and areas in need of rehabilitation. This helps improve the property conditions in Portugal’s cities.
The standard advantages of getting a Golden Visa in Portugal include:
- Right to live and work in Portugal
- Freedom to travel within the Schengen period without an additional visa
- Ability to spread the visa to the rest of the family
- Chance to apply for citizenship in Portugal at the end of five years
So, what makes the 350,000 Euro option special? Well, its advantage is:
- The reduced amount compared to the other available Golden Visa investment options
In the classic real estate investment scheme, the applicant is required to spend a minimum of 500,000 Euro in a property in Portugal. In the capital transfer investment scheme, the applicant must transfer a minimum of 1,000,000 Euro into the country. The urban rehabilitation option of real estate, on the other hand, has a minimum investment requirement of only 350,000 Euro.
The 350,000 Euro minimum investment amount covers both the property acquisition cost and the renovation costs. For example, the acquired property may be 290,000 Euro and the renovation may cost 60,000 Euro, making the total invested amount 350,000 Euro.
You would also be able to invest in multiple properties within the 350,000 Euro threshold. Let’s assume two properties of 140,000 Euro and 160,000 Euro respectively, to be renovated at a total renovation cost of 50,000 Euro. Let’s also assume that both of these properties are either in an urban rehabilitation area or that they are at least 30 years old. The total would amount to 350,000 Euro, qualifying you to apply for the Golden Visa program in Portugal.
Challenges of the 350,000 Euro Property Option
While offering a lower investment barrier to the investments, the Portuguese government did not want to cannibalize the 500,000 Euro real estate option. So, there had to be a bottleneck in this option. It is the extra effort that is needed to comply with the particular requirements of this investment method.
There are a number of challenges associated with this particular investment method. Accordingly, as the investors, you should perform a proper search and a thorough due diligence on the available options. We have created a checklist with an exhaustive list of aspects that need to be watched out for. In any case, we recommend the use of a professional in your search. Feel free to get in touch with our experienced team.
Real Estate Requirements
The primary challenge is to seek and find a property both fits the criteria of the program and the needs of the investor. The property is required to be more than 30 years old or located in an urban rehabilitation area (ARU).
ARU territories in Portugal are identified by municipalities as areas with degradation. Hence as the name suggests, these areas are opened to “urban rehabilitation” by the State.
Naturally, such areas are not always the most alluring to the international investors. This restriction by itself, limits the freedom of the investor to choose and invest in an appealing location.
The next challenge is to carry out rehabilitation works on the acquired property. This step typically involves licensing, hiring of professionals such as architects, engineers, and contractors, and monitoring of the renovation process.
It is mandatory to carry out this step on the property. The investor does not necessarily have to be the party to orchestrate all the renovation process, however. There are many developers willing to carry out the complete operation on behalf of the investors.
Is there a turn-key solution?
Luckily, yes, there are. The challenges should not discourage you from pursuing the 350,000 Euro Portugal Golden Visa option. There are turn-key solutions being offered by real estate developers in the market.
Therefore, it is possible to purchase a pre-selected property, which meets the legal requirements for this investment method. Developers deliver such properties with pre-approved licensing, architectural and construction works completed, in the designated areas that qualify for the program.
Such products range from residential properties to short term rental units, fractions in hospitality projects, or commercial units.
Better yet, it is common for some of these package deals to include the property management within the deal. That is, the developer or a third party company can be responsible for renting out your property on a short term basis.
The rental income may be reflected to the investor through a fixed annual rental guarantee or in a revenue share model, depending on the project.
Mind you, some of these rental guarantees are practically a marketing gimmick in order to promote the development. Be careful to make sure that the guaranteed rental amounts are not already reflected on the inflated sales prices. Best way to make sure is to look for comparable prices in similar areas for similar property types.
Although this is a less frequent feature than it used to be, some of the developments offer a buy-back option to the buyer. In a typical 350,000 Euro property package with a buy-back option, the developer provides a rental guarantee for a certain number of years. At the end of that period, the developer commits to buying back the unit at the initial sale price.
This time period is generally set out to be five years or more, in order to make sure the investor passes the Golden Visa residence permit period and qualifies to become a Portuguese citizen. Once a Portuguese citizen, you no longer need to maintain your Golden Visa investment. So, it can be sold back to the developer.
Although a number of turn-key solutions are available on the market, it is very important to do the right due diligence. Your law firm should do a proper analysis of the developer and the project, making sure that the investment qualifies for the Golden Visa. The track record and reliability of the promoter should also be verified.
It is not uncommon to come across developers that abuse the lack of qualifying 350,000 Euro property supply in the market with unreasonable profit margins. Always check to see what the comparable prices are in the same neighborhoods for similar products.
If you need advice to steer you through an objective search for qualifying properties, feel free to get in touch with us.
Golden Visa: Benefits and Investment Methods
Portugal Golden Visa is a residence permit for investors (ARI). It was created in 2012 in order to attract international investors to the country. The main benefits of the program include:
- The right to reside and work in Portugal
- Free travel throughout the European Schengen Area
- Short Stay Requirement: Only one week annual residence is required on average
- Possibility of obtaining Portuguese permanent residence or citizenship after 5 years
- Possibility of extending benefits to the rest of the family members
In order to apply to the Golden Visa program, you need to make one of the qualifying investments in the country. These investments include real estate acquisition, capital transfer, investment in certain companies, creation of jobs, investment in scientific research or artistic production.
Changes to Portugal’s Golden Visa Program
In February 2020, the State Budget Law was approved. One of the topics covered in the law was the authorization of the Government to proceed with a number of changes in the Golden Visa regime in Portugal.
So, exactly what are these changes that were proposed to be applied on the program?
1) Restriction of the required real estate investments to the interior territories of Portugal, Madeira, and the Azores. This means that any real estate investment in Lisbon, Porto, or the coastal Algarve region would no longer qualify the investor for a Golden Visa.
2) Increase in the minimum investment amount and the minimum number of jobs required to qualify for the program.
It should be noted that these changes were initially supposed to be implemented within 2020. Then, they were postponed. There is unofficial information stating that the changes will be implemented in 2021. However, the exact date or the specific scope is still unclear.