Portugal's Silver Coast

September 24, 2020

Transcript

SPEAKER_00 0:17

Ronan here, and welcome to your notes from the field. Greetings from Portugal's absolutely stunning silver coast. I'm coming to the tail end of the first leg of my mammoth Portugal scouting trip that's gonna take me from Lisbon to here to Coimbra to Porto, north of Porto, and then back south to the Algarve. But um close on close on one week down, um I've seen a lot. I'm sitting here on my terrace, the Atlantic. It's a a flat blue Atlantic, save for some surfers rising up in front of me. There's there's islands in front of me. Lisbon is is is an hour further along the coast, and it's an absolutely stunning picture perfect vista. We've temperatures of 75 degrees, it is quiet, it is picture perfect, pine forests, and it's it's absolutely beautiful. I've been charmed by the charmed by the area, and um it looks like I've just had an offer accepted on this um Airbnb that that I'm renting. So um so as you know, um the the purpose of this mammoth extended Portugal scouting trip is to find more of our typical Rita deals, which is pure money-making opportunities. These can be in places we don't even want to visit or like to spend time, it's just all about the money, capital appreciation, and rental income. Um, I'm also here on a mission to find um a Portugal base for myself. Um I will be spending a portion of each year here in Portugal for the foreseeable future. Um so I'm looking for a base that matches my personal criteria, which again, my personal criteria aren't uh a Rita recommendation. There is a set of things that are very specific to my situation, but I'm hoping by sharing the process I go through with you, it'll help you with with your own process. And this is a primarily lifestyle-driven purchase. And you know, I'm not going to be here in the summer months, so um a significant part of my original criteria was to generate kind of strong rental income when I wasn't here. Um that's somewhat changed now in light of what I've what I've found here. Um I've decided to put in an offer, and the offer has been tentatively accepted in a place that doesn't have particularly strong rental income. And you know, I'm sacrificing that rental income component for two things, um a lower purchase price, and secondly, it's just a place I want to spend time. So um I'm perfectly comfortable that I can take the the proceeds of strong investments in other places and that this is a this is a lifestyle purchase. And then finally, the the third piece in terms of this trip that that I'm looking at is to find um really inexpensive bolt holes, um what I call kind of cheap dream homes. And that's just this kind of fun side project that I've been telling you about as part of Project Prosper. So um so what I've found, um so I landed, landed in Lisbon Airport last Thursday evening, got straight in a rental car and drove straight here to Praia del Rey. Um I am an hour from Lisbon Airport and just about 15 minutes from the from the medieval city of Obidos. So this is a a very, very interesting stretch of coast. Um first of all, weather-wise, you're you're you're north of Lisbon, so anytime you're going north of Lisbon, the the weather is going to become, I guess, less Mediterranean, more Atlantic. So um so the the weather here would certainly be a lot less reliable in terms of in terms of of sunshine, more rain, fewer days of sunshine, but still um the weather is much, much better than than than I anticipated before coming to this region. You know, in the past I've shared with friends, you know, I remember before I started scouting north of port of north of Lisbon for real estate opportunities, I had this perception that the weather could be regularly very dreary, almost let's call it Irish type weather. And sure, it gets more rain here, but there's still lots and lots of of sunshine. So, you know, so now into the into the tail end of September, as I say, I'm sitting on my terrace in evening sunshine in the in the mid-70s, and that's pretty typical. And for me, that's perfect. But still, the the ocean front, the the the apartments here tend not to have air conditioning, because air conditioning is is is very rarely needed, albeit weather in August can get can get can get extremely warm. And this is an area that um you know traditionally was more a Portuguese, um more a domestic tourist destination, where we're just about an hour from Lisbon. In terms of tourism machine, it is nothing like what the Algarve is. And so it's it's just nothing like the volume of international vacationers, it's nothing like the volume of international second homeowners, it is much much quieter, it's extremely sleepy. Um here in this kind of in this obidos area, there's a number of big kind of golf and second home resort communities. Again, they're did this one Praia del Rey. Um, you know, it started several decades ago. It's extremely well developed with the with uh a Marriott Hotel, it's very prominent domestically, it's well known for hosting the the Portuguese soccer team when they're when they're training. There's excellent golf course here. Um earlier this year. And then outside of those kind of master plan communities, um, you've got lots of really, really nice villas with views to the to the lagoon. So there's a lagoon here and and also the ocean view. So, first of all, pricing. Um real estate prices here are extremely good value for money and extremely low relative to what you'd expect in other resort destinations in Spain and Portugal. So here in Praia del Rey, for for example, you can buy a albeit dated, albeit a bit older, but fine, well built, very spacious, 13 or 1,400 square feet apartment. Now these these are older and these are back from back from the ocean, um, from as little as 150,000 euros. So again, with with Portugal, always bear in mind that part of the deal is the extremely inexpensive financing that you know foreigners can borrow from certainly under 1.5%, in some instances, even 1% are lower. So extremely inexpensive for a well-built condo in a great master plan community with golf courses, with miles of beach, with surfing, with tennis, with um with hotels, all that jazz that you'd expect from a big master plan community. Um, in terms of villas, bigger homes, um, for 400,000 euros you can buy a home of two and a half or three thousand square feet on its own lot with with its own with its own pool. So those prices are maybe half of what you'd what you'd expect to pay in in the Algarve and you know also close on half to kind of equivalent locations in the in the Costa del Sol in Spain. And um and and the the the the reason values have have stayed low is um is that it's just not an area that's got the the surge of of international buyers. Certainly, certainly not yet. But also the this this lack of or the this smaller volume. So you know, don't get me wrong, there's plenty of Germans and Swedes and British around here, you know, they're they're they're here, they're just not here in the same numbers as they are in in other um in other in say the Algarve or the or the Costa del Sol. But that also means that the the rental market here is also much much weaker. Um so the rental market here is you know lower rates, lower occupancy, um, much more much more seasonal, much more tied to Portuguese summer holidays. So from a straight up pure rental opportunity, you know, the the the the numbers really don't stack up. So where I'm sitting here, um so the the condo that that I rented for this week and the condo that um that that I've just had an offer accepted on. And you know, I'll I'll run through the all the numbers once once the deal closes and give full kind of transparency on how I negotiated and what price I got and what I think that relates to maybe maybe fair market value. Um but I I I don't want to do that until the deal is is closed, as I'm sure you can understand. But the true ocean front condos here with um with that sound of the waves crashing, which hopefully you can you can hear be here behind me, you know, condos like this um are only grossing kind of 12 to 15,000 per year in rental income. The the equivalent condo in the Algarve, first you couldn't get it because you you just can't build this close to the ocean and um here these condos, you know, they they were built in in 2005, subsequent to that the the law has changed, meaning that you can't build within 500 meters of the ocean. So, you know, it's very true to say they they ain't making any more of it. So when I say in the Algarve the an equivalent condo, there isn't an equivalent condo, but the closest condo you could find would cost significantly more, but instead of generating um 12 to 15,000 dollars a year or euros a year in rental income would be more like 50 to 60. So um so the the the the the first I guess to to a large extent this is what what I expected and the the the the numbers showed that out and played that out that the rental market is weak. You know, I've spent the last three days, you know, there's a lot of rental managers around, you bump into them in the in the various projects and pulling them aside, asking them for rough numbers, and and they all tally to a to a weak rental market. So from the perspective of from the second home perspective, there's deep, deep value. And that's why that's why I chose to to put in an offer here, and you know, hopefully I'll be be going going ahead and and closing because um because you have you have access to golf, which is extremely important to me. It's much less expensive and it's much more accessible than than in the Algarve. You've you've all this beach access and you just have uh quietness and solitude, which is important for me, um, but can be more difficult in the Algarve. So all the reasons that the Algarve are a great investment location for us, they kind of pushed me north because in terms of my second home, I'm I'm not looking for, I'm not looking for the crowds, I'm not looking for the buzzing restaurants, um, I'm looking for peace and quiet because this will be a place I'll come in between you know big extended periods of periods of travel. So I guess the the the takeaway, really, really inexpensive second home opportunities with an opportun with the chance to supplement it with um with some rental income, you know, in particular in um in July and August. You know, if you just rent in July and August, you'd cover, you know, you'd you'd cover your HOA fees, you'd cover the costs of property management, and you'd be left with, you know, you'd be probably cover 50% of your mortgage, but you'll definitely be cash flow, be cash flow negative. Um the in terms of the the the the communities here, the um Praia del Rey in terms of value, um that to me you know was kind of best in class. To a large extent, like the fact that so much here was built and so much was built so long ago means that there's a lot of resales coming on the market. So there's a lot of resales with a relatively illiquid period, so that means there's there's great value to be had. You know, another thing about here compared to the Algarve is that in the Algarve, if you stop using your property, you have the potential to generate such strong rental income, you probably won't really even care about selling it because it's generating, it's throwing off such a strong, strong income stream. Holding a property here that you're not using incurs costs. So you're much you're going to be much more likely to offload it and be motivated to offload it. So there's opportunities again to buy cheap here from from a lifestyle perspective. Um outside of you know the outside of the resorts, there's another community that um that that I looked at called BOM Succeso, which um which I was really really excited about seeing. Have have a look online, it's BOM BOM SuccessO. I I had these really high hopes that this was just going to be this really special and stylish community, and what I found was was a project that excuse me is just full of these half-built homes, half-built little projects within the within the master plan. It you know, it's it's it has just all the hallmarks of no offense to architects, but a big conceptual project being handed to architects, and no one was no one was really paying attention to whether the commercials of of everything could hold together. And what's what's left I was really, really disappointed with. That was a place where I thought there would be very very special and you know beautifully designed villas and uh a whole community that's that that's integrated and feels very zen and you know what what what I saw was a cluttered mess of half-built construction projects. So that was a big disappointment. Um the the town of Obydos itself is really just a medieval village. It's a charming place to to come and spend time, to hang out. We took a horse-drawn carriage through it, um you know I took some photos that I put on Instagram and that I'll share below here. And it's it's it's a charming attraction. But there there isn't a there isn't a huge amount, there isn't a huge amount to it other than a place that you you'd visit for day trips. Dotted around the the hills and the countryside overlooking the the ocean and also with with views to the lagoon, you can buy standalone villas, individual detached houses outside of any gated community or anything like that, with kind of prices from about 270,000 euros with a nice pool, nice modern finish, great views. Um you go up in budget, and with each jump in budget you can get an even more impressive and and stylish villa. I mean, a budget of 600,000 euros will get you an absolute fabulous modern glass fronted villa with pool and big lot and panoramic view to the to to the sea and the lagoon. The design here is typically pretty pretty minimalist, lots of glass, lots of slick, clean lines. Um it's it's very much to my taste, but if it isn't to your taste, um you know a lot of the the villa construction here mightn't mightn't be for you. Um the again one of the things in terms of my like my my my personal criteria how how this place kind of won out for for for for me is you know the in lockdown in Cabo, what what I found was truly important to me was first of all to have a big terrace where in the shade I could just pop open my laptop and read and write and all the time taking in the the ocean sounds and you know that I could just leave my condo and in a very short stroll. or or a brief drive. I could just be on a on an empty beach. I wouldn't have to be dealing with you know people trying to sell me stuff or I wouldn't have to deal with parking issues. I could just be there. I could just go there and I could just write from there or you know or stroll or read or do whatever. And here I found I've been able to to to to to to to replicate that and it's almost a a carbon copy of of of of of that setup. So I found that this process very very interesting because when when I was looking online you know I started finding myself drawn to some of these shiny big minimalist houses with their own pool and with their big gardens and some of them have you know little areas of pine forest and it's it's all absolutely beautiful and but it's just not for for it's just not for me because it's got maintenance headaches it's got you know I'm only going to be here for um I'm going to be coming and going I don't want to be dealing with with pool issues I don't want to be dealing with cleaning walls issues just there's all this type of the the practical reality around the the ownership issues and you know I'm I'm I'm I won't say the I'm I'm glad I took the time to kind of step back and really really profile myself and map out exactly you know ruthlessly what I'm looking for and and separate these things of you know you know the the kind of the the ego and the grandiosity or whatever around having the the big village it's just not practical. It would make my life it would make my life a a a misery trying trying to manage it. So it's very important to be to be clear on these things and that's why certainly for me you know a condo um comes out trumps over you know either a detached villa on its own outside of a community or one within a community. Of course in in many countries you know people most many people will want to be in a community for security you know security you know pr pretty much all of Portugal is about as safe as as anywhere can be and even in this these what I call resort communities the the there's no barriers or there's no securities on on entry the the infrastructure and stuff like the garbage connection all that's still given over to the public authority so they're they're set up like these big master plan communities but they don't have security or gated communities. Another thing holding costs are are extremely manageable here and property taxes on a condo like this run at about 500 euro a year and the um the annual HOA fees are 2000 euros so about a 160 you about 160 euros a month. In those older condos um you're looking at in those those older condos um you're looking at monthly condo fees of only about only about 100 euro a month and um and proportionately less property tax as well so it extremely low and and manageable holding costs. So that's it and tomorrow we leave for Coimbra in Coimbra I'm going to be looking at some very very interesting big old buildings that have great renovation potential for use as student rentals and also summer Airbnbs. From there I go to Porto to look at again bigger buildings that old mansions that could be subdivided and resold or rented. I'm also going to check out um a couple of the cities just north of just north of Porto I've been hearing a lot about Braga and I'm not sure if that's the correct pronunciation but it again it's a I believe it's a it's a student city and there's also a an area on the coast immediately west of there so um so I'm gonna keep going north keep going north and um and then from Porto um I'm gonna hand back my my my first stage rental car in Porto jump in the train train to the Algarve get a new rental car and then in the Algarve I'm going to have three different bases and again you know I guess travel is is different now you know that's that's the the the the the reality travel is different for the for for the foreseeable so you know so I'm going slower um avoiding avoiding crowded restaurants and just taking my time and and and being careful but it's it's also afforded the the the the luxury of time and you know I'm going to have three different bases in the Algarve and you know that will mean that I'll be able to kind of really really scratch at each of those areas central west around Lagos and and eastern Algarve so um you know so so not just not just dipping in and dipping out and you know and in in the Algarve the our contacts in the Algarve have lined up some really really exciting opportunities at at each part of our play in particular um villas with potential that villas in the central Algarve that we can um we can tart up and make available for rental and resale and just that old play that um my friend in contact Chris White down there has been been doing himself and has been highly successful at it. I mean this is another moment when that play comes into its own um because there are motivated sellers so um so yeah that that's it from from beautiful Portugal overlooking the the sea and the waves I hope you can pick up some of the sea sounds but maybe not as I've got a a new mic and it's supposed to block out all sorts of background noise. So take care and um I'm gonna talk to you soon from either either the north of Portugal or the Algarve but I'll be I'll be keeping you posted in your in your Rita alerts as I go to the U