Your Ultimate Guide to Renting Out Your Property in Portugal

Portugal’s property market has fast become one of the most sought-after in recent years. A key draw is the fact that the real estate market caters to all types of investors and property buyers. While there has long been a strong demand for tourist rentals and vacation homes for tourists, more expats than ever before are looking to secure long-term rentals in key parts of the country. If you have purchased, are considering buying, or are in the process of snapping up a charming property in Portugal, this has opened an appealing opportunity.

Whether you are looking to capitalize on your property investment with short-term rentals or long-term rentals, you will find plenty of options, with an array of property types, affordable properties, and a range of locations offering strong rental yields.

In this article, we will provide you with everything you need to know about renting out your property in Portugal, from choosing the right location to understanding the legal considerations.

Introduction to the Property Rental Market in Portugal

The Portugal rental market has experienced massive growth in recent years, with expats from all walks of life looking for a place to stay in the country. What’s more, in the past, expats have focused on renting in Lisbon, Porto, and the Algarve. Now, more expats are looking to other locations, such as the Silver Coast and cities such as Aveiro, Braga, and Coimbra, providing a more varied rental market.

While tourist rental accommodation is an excellent short-term investment, digital nomads, students, couples, retirees, and even families looking for a base are creating a strong demand for longer-term rentals. This rise in demand has led to a flourishing rental market, offering property owners lucrative opportunities for both short-term vacation rentals and long-term leases.

Long-term versus Short Term Rentals

Long-term and short-term rentals each provide an alluring opportunity for investors. Below, we’ve outlined some of the key advantages and disadvantages of both. The best option will depend on your personal requirements and what you are looking for. As a rule of thumb, short-term rentals generate a higher income but require much more work than long-term rentals.

Long-term rentals

Below, we’ve outlined some of the advantages and disadvantages of long-term rentals.

Advantages

• Assured fixed income: Unlike short-term rentals, where seasonal fluctuations can leave your property without a tenant, a long-term rent contract spans 12 months minimum, ensuring a steady source of rental revenue. Many digital nomads, students, and young professionals are seeking long-term accommodation in Portugal, leading to an increased demand for long-term rentals.
• Less damage to your property: Extended stays typically result in fewer damages compared to short-term tenancies as they take more care of the property, leading to lower maintenance expenses.
• Fewer management costs: While short-term rentals require constant management, such as key hand-over and cleaning between tenants, having a single long-term tenant reduces the need for frequent property cleaning and management, thus lowering associated costs.

Disadvantages

• Lower rental yields: Long-term rentals generally offer lower returns compared to short-term letting arrangements, impacting potential income.
• Legislation Portugal’s robust tenant protection laws can make it challenging to evict tenants or adjust rental rates, posing potential obstacles for landlords.

Short-term real estate rentals in Portugal

You should also understand the advantages and disadvantages of short-term rentals, which are outlined below.

 Advantages

• High returns: Short-term rentals in Portugal present an enticing prospect for investors seeking higher returns, especially given the surge in popularity of booking platforms like Airbnb. Additionally, Portugal boasts numerous property management firms capable of overseeing your property on your behalf. Note that there are currently restrictions on securing an Alojamento Local (AL) license in Portugal, which is needed to lease your property short term (see below).
• Personal use: Opting for short-term rentals offers the advantage of flexibility, allowing you to enjoy the property at your convenience.

Disadvantages

• More hassle: Short-term rentals often demand greater engagement from property owners. It’s important to secure the services of a trusted management company to oversee the property, for example, to assist with cleaning, property maintenance, and so on.

Regulations on short-term rentals: Recent legal measures have imposed restrictions on short-term rental operations, such as the suspension of new AL licenses. There are also local regulations to bear in mind, where some zones may also have AL license restrictions in place.

A Step-by-Step Guide to Renting Out Your Property in Portugal

Below, we provide a simple step-by-step process for renting out property in Portugal. We highly recommend working with a property management company to assist you with renting out your property. The process can be difficult, and while managing the property on your own can appear to be exciting, there are many intricacies and challenges that can arise. Working with trusted property managers and a lawyer is essential to ensure a stress-free process, and you will likely save money in the long run.

Step 1: Get your documents in order

Renting a property in Portugal will involve the execution of a contract between the landlord and the tenant. The formalization of this contract between the landlord and the tenant must adhere to the regulations outlined in the Civil Code and the New Urban Lease (NRAU). This contract needs to be registered with the Tax Authority, and for this, you will need to have a Portuguese Tax Number (NIF).

Additionally, securing an energy certificate for the property is mandatory. This certificate verifies the energy efficiency of the property and can be obtained from ADENE (Energy Agency). To acquire it, you must furnish a copy of the property’s floor plan, the caderneta predial urbana, and the property’s technical file.

During the lease agreement’s signing, it’s important to present the energy certificate to the tenant. Failure to possess this document can result in heavy fines.

Step 2: Determine rental prices

To determine the rental price, you should evaluate the taxes you will need to pay and analyze the market so you can set a realistic and competitive price. Check for the average rental price in the area as a ballpoint and then work out how much you can market your proeprty for. You’ll also want to consider the location and characteristics of the property. A real estate professional or property management company will be able to assist you with this.

Step 3: Setting Up Your Property Listing in Portugal

Should you work with a property management company, they will be able to assist you with local insights and expert assistance in portraying your property in Portugal in the best light.  This includes advertising your property online (for example, Airbnb for short-term rentals) and offline.

Step 4: Screening tenants to meet your criteria

Many will ensure you secure tenants that meet your exact requirements, including screening the tenants to give you peace of mind and save you precious time and hassle.

Step 5: Prepare and sign the rental contract

To rent out your property, you will need to formalize the rental agreement and submit it to the Tax Office electronically via the Finance Portal by the end of the month following the beginning of the lease.

The agreement necessitates signatures from all involved parties, with each party retaining a signed copy. The first step is to determine the rent value. Essential clauses to be integrated into every lease agreement encompass:

• Identification details (ID and NIF) of all parties involved
• Rent payment schedule
• Purpose of the lease
• Duration of the contract
• Notice period for termination of the lease
• Rental amount and security deposit and if you want a month’s rent upfront, etc.
• How you will receive the monthly rent (e.g., bank transfer)
• Information on the guarantor, if applicable
• Description of the property’s condition and inventory of its original contents

A lawyer will be able to assist you with preparing the lease and ensuring everything is in order.

Step 6: Managing bookings and tenants

After the tenant moves in, you’ll need to collect rent and address maintenance concerns and breakages. You will also need to comply with legal requirements, such as having a fire extinguisher.

Portugal rental contract termination

At the end of the tenancy, you must report the termination of the contract through the Finance Portal (Portal das Finanças). At the same time, you will return the deposit to the tenant, provided there are no issues with the property during your inspection.

Financial Aspects of Renting Out Property in Portugal

When renting out your property in Portugal, it’s important to consider certain taxes. Generally, net rental income is subject to a flat rate of 28 percent tax, but there are potential deductions available for the following expenses:

• Mandatory fire insurance premiums for rental properties
• Costs related to IMI (Property Tax)
• Expenses incurred for obtaining an energy certificate
• Condominium fees, where applicable
• Expenditures for property upkeep and maintenance, including repairs and replacements (provided they are legally documented and not considered as furniture)
• Maintenance and conservation expenses conducted within 24 months prior to renting out the property

It’s essential to provide invoices identifying the work carried out on the property and its location to qualify for deductions from rental income tax. Additionally, there are distinctions between short-term and long-term rentals to be aware of.

For a full rundown of property taxes in Portugal, you can check out our article, Property Taxes in Portugal. From understanding taxes that you will need to pay at the time of purchase, including the Property Purchase Tax and Stamp Duty, to those you will need to pay on an annual basis, such as Municipal Property Tax, this article has you covered. To pay tax in Portugal, we highly recommend working with a tax accountant who will be able to ensure that everything is in order as, particularly in a foreign country, dealing with taxes can be difficult.

Choosing the Right Property Renting Service in Portugal

Choosing the right property renting service in Portugal can significantly streamline your experience as a landlord, saving you time, hassle, and money in the long run. As we’ve mentioned, particularly when you want to rent out your property in a country where you may be unfamiliar with the language, customs, and processes, having assistance with managing and maintaining your property is essential. After a quick online search for “property renting service Portugal”, make sure you narrow down your search based on testimonials and research before reaching out to the few that catch your eye. Make sure to ask targeted questions so that you can see how they have helped individuals in similar situations to your own.

Not only will property management companies ensure your property is managed to the highest standard, but they will also be able to effectively market your property and secure reliable tenants that meet your requirements. They will also handle any disputes that may occur.

Goldcrest: How We Can Help You

Goldcrest is the first buyer’s agent in Portugal. Having helped hundreds of expats successfully relocate to Portugal or snap up the perfect investment property, we have ventured into providing key property management services for landlords looking to rent their property in the long term.

Should you be looking for property management services or for help in liaising with tenants, we are here to help. From marketing your property through to tenant management and arranging repairs and maintenance, we have you covered. We provide a streamlined service tailored towards your needs, with a pick-and-choose approach that allows you to secure just the services you require.