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Rental Market from an investor perspective

The rental market in Portugal is a bit of a mess - way more demand than offer, a lot of empty houses, complicated contract rules. Here I'm going to explain why some of these things happen and give you some pointers and an overview of what to expect as an investor who is looking to get money from renting.

The first thing you need to know is that there are two main ways to be a landlord - long term contracts or holiday rentals. I'm giving a short overview of both.

Long Term Contracts


  1. Relatively low maintenance - low rotation of tenants if done right;

  2. Lesser risk of damage/higher protection;

  3. No need for constant marketing & incurring fees;

  4. More sustainability for the local economy;

  5. Very high demand;


  1. Less profitable;

  2. Not very suitable for stays shorter than 12 months;

  3. 3 months for legal termination due to lack of payments;

  4. Tenants leaving early leads to loss of profit;

  5. Legal battles for evictions are very slow;

Standard taxes on long term rentals are according to duration (not the contract term but the actual duration of the contract to date):

  • Less than 2 years: 28%;

  • From 2 to 5 years: 26%;

  • From 5 to 10 years: 23%;

  • From 10 to 20 years: 14%;

  • More than 20 years: 10%.

There is also a stamp tax that is equivalent to 10% of one month of rent. As you can see, it is really not advantageous to have shorter term contracts in the standard rental regime.

The rental market has been steadily rising in prices. Although from a foreign investor perspective rental prices are low, from an internal economy perspective they are getting quite high. As expected, supply and demand dictate the market and so bigger cities have much higher prices: Lisbon being the most expensive one with an average of 15€ per sq meter or rent. While Porto stays at 9,5€ per sq meter. Countrywide, the average is 5,8€ per sq meter - this is considering the INE numbers (national statistics).

There is a huge discrepancy between the rent values on old contracts and new contracts. There are contracts that date pre-2000 with ridiculously low prices (less than 100€), while new rentals of apartments in good conditions in the center of Lisbon can easily go up to 1500€.

Using our MLS program, we made this chart of rent variations since 2018 in a few Portuguese cities, that represents the current market more accurately because the INE ones includes very outdated (but existing) contracts that don't reflect the current reality.

Amenities like climatization, good appliances, well decorated and spacious interiors, good energy certification and a central location allow for a much higher prices.

There are several ways to declare rent as long term, so it's something you need to go over with an accountant as the best way depends on how much income and the types of contracts you are doing. You can be a long term landlord both as a private and as a business. Business is usually much more advantageous if you own more than 5 units (depends on the amount of rent). Landlords are also responsible to do standard repairs, pay building management fees (condomínio) and IMI (Municipal Real Estate Tax). Expenses are deductible for tax purposes.

Truth is, only a very small percentage of landlords actually declare rents. According to public statistics, only just under 8000 apartments are rented in Lisbon, and that's the highest number in the country.

Taxes are high, so many try to avoid them, but the risk of doing so falls almost totally on the landlord - if there is a denunciation, there will be a heavy fine. On top of that, it is practically impossible to legally evict a tenant and you incur the risk of a "uso capião" in long term rentals where the tenant can just claim it's their house because they have been living there for over 10 years "without charge".

There are a lot of empty houses in Portugal because there is a lot of protection for tenants. Although nowadays, legally you can terminate a contract after 3 months for non payment and evict the tenant, they need to leave willingly. The tenant will be warned and notified by the police, which will incur a criminal record. However, if they still don't leave the premises, the eviction process will go through the court, which can be time-consuming and expensive, as there is a fee of about 2000€ to initiate said process. Not to mention that the judicial system in Portugal is known for its terrible waitlists.

For this reason, it is also very hard to sue for damage. While you can still do it, it will be a long and tenuous process that will only be worth it if the tenant actually has the ability to pay, and the damage costs more than the process itself.

Therefore, it is best to do a thorough screening of tenants. Such problems tend to be the exception and not the norm but definitely something you'd want to avoid at all cost. Because of this, you will notice landlords are getting increasingly demanding in their requests. Tenants are not required by law to provide proof of income to landlords, but landlords are also not required to accept tenants who don't provide such proof. In the end, there is much more demand than offer so most people are willing to submit the necessary proof to ease the landlord's mind.

Holiday Rentals (AL)


  1. Very profitable with high occupancy rates;

  2. Low risk of legal battles/evictions;

  3. Easy to declare expenses - can be cheaper tax-wise;

  4. Flexible when it comes to length of stay;

  5. No need for contracts with tenants;


  1. Needs a licence and it's often a slow process & hard to turn back to a residential status;

  2. Utilities need to be included (but limits can be set) & are at higher business rate (higher);

  3. Need for marketing/partners/manager to keep occupation high;

  4. Higher need of cleaning and maintenance due to high rotation;

  5. A lot of competition in the market, especially in big cities (pressure to stand out);

  6. Depends on external factors like tourism;

Holiday rentals were heavily affected by the pandemic, but prices are rising once again and will likely go back to 2019 values in no time. The graphic below shows how the market performed in the last 3 years in the 2 major cities, Lisbon and Porto:

When you establish a property under the "Alojamento Local" regime, it basically becomes a business: you pay utilities as business and declare tax as business. Even if you don't start a company, you have to open activity privately (like self-employment) for this purpose. You also pay 6% VAT unless the total billing is under 10k.

If you just own one property, declaring privately is usually more advantageous but if you own multiple properties it's usually better to have them under a business status. Like with long term rentals, there are multiple ways to declare these earnings, and this is something that should be consulted with an accountant, as the most suitable ones need to be analysed on a case by case scenario.

One of the advantages though, is that there are a lot more expenses to declare, and therefore deduct from taxes - utilities, platform fees (like airbnb), management fees, cleaning charges, repair charges, security system, etc.

There are quite a few requirements for a property to qualify for Alojamento Local:

  • Pre-registry in the national database;

  • Existence of a security system, fire system, first aid kit & emergency numbers;

  • All transactions need to be billed in a certified system;

  • Has to have a complaints book (Livro de Reclamações);

  • All communication and advertisement requires a registry number;

Non-compliance with any of these rules will result in fines. This is a reference for lodgings that support under 10 guests, bigger lodgings have different rules.

Expect to wait 3 to 6 months to get your AL licence. However if you buy a property that already has an AL licence, you do not need to request a new one, and can just keep operating after updating the ownership status. AL properties are also not restricted for Golden Visa purposes as they are business properties.

The length of stay under the AL regime has no limitations, it can be one night or 2 years, but short stays are usually much more profitable.



Prices are rising and there is a lot of demand, there are good opportunities for income.

Real estate investment is something you should consider as a long term investment, especially for rental (there are a number of other models). It has the added benefit of the asset gaining value due to market inflation, on top of the rental income - it's a bit like a savings account with much better rates. However you can not cash in fast, as selling the property will always take some time (especially in Portugal), so take that into account when considering this type of investment. In the long run (20+ years) it tends to be a very good way of preservation and inflation of assets, so it's most advisable to use disposable capital for this purpose.

A 10% return on investment on rent is possible in Portugal, but hard to obtain. 5% to 9% are much more realistic numbers. This means that the time to get the amount invested back from just the rent will be from 10 to 20 years. I'd say always consider 20 years, if it's less than it's a plus.

Investment is always something that should be analyzed on a case by case scenario. At Savvy Cat Realty we help you with everything from the purchase, calculations, renovations, management, and we offer you the best advice to optimize your investment according to your needs or to connect you to the people who will (accountants, lawyers, etc).

By Ana Caramujo

Hope this article was helpful, any questions you might have feel free to contact us! We are always available at if you need any assistance ;)

You can book an advisory call to go over your particular case here: Relocation Advisory Call with Ana Caramujo

You can also check the trends and statistics of the Portuguese real estate market here:



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