1. Restriction of the real estate investments necessary for the granting of the Golden Visa to the inland territories of the country, Madeira and Azores. The cities of Lisbon and Porto and the Algarve region are no longer considered for granting the visa;
2. Increase of the minimum investment amount in some modalities foreseen for the Golden Visa.
Golden Visa for Real Estate Investment
According to official data from the SEF (Serviços de Estrangeiros e Fronteiras de Portugal), between October 2012 and July 2022 Portugal had already issued more than 10,983 Golden Visas, 92% of which were granted through the acquisition of real estate.
Although real estate investment is the most popular among investors, what many people don’t know is that there are two different ways of investing in real estate, with very different requirements, including the amount of investment required.
See how to invest in real estate in Portugal and have above-average returns in this article.
Classic investment x Investment for rehabilitation
Golden Visa for “classic” real estate investment
At the time it was originally set up, the Golden Visa Scheme provided for only one form of real estate investment to obtain it: through the acquisition of immovable property of a value of EUR 500 000 or more.
In this “classic” real estate investment modality, it doesn’t matter if the investor acquires one or more properties, if these properties are new, restored or old, what matters is the amount of investment applied in their acquisition, which must be equal or superior to 500 thousand Euros.
It is worth remembering that properties bought in the cities of Lisbon, Porto, or in the Algarve region are no longer eligible for the Golden Visa.
Golden Visa for urban rehabilitation in Portugal
However, in 2015 the Portuguese government introduced a new modality in the Foreigner Law providing for real estate investment for Golden Visa purposes, through:
Acquisition of real estate, whose construction has been concluded at least 30 years ago or located in an urban rehabilitation area, and execution of rehabilitation works on the acquired real estate, for an overall amount equal to or greater than 350 thousand Euros;
Considering that this modality demands an “extra effort” on the part of the investors with the realization of works in the property that is to be acquired, the value of the investment is considerably lower, the global amount necessary (acquisition of the property + works) becoming 350 thousand Euros.
Therefore, for Golden Visa application purposes, today there are these two modalities: the classic real estate investment (worth 500 thousand euros) and the Golden Visa for urban rehabilitation, with old real estate or located in urban rehabilitation areas, worth a minimum of 350 thousand euros.
Investment values can be even lower
If the properties in question are acquired in low density territories, according to the legal definition, the value of both real estate investment modalities can be reduced further by 20%.
To understand more details about the reduction of the values, read the article about the Golden Visa 280,000 real estate investment.
Real Estate Investment Requirements for Rehabilitation
When directed to the initial Golden Visa application, the main requirements for the rehabilitation real estate investment mode are:
- Property Requirement: construction concluded more than 30 years ago or located in an Urban Rehabilitation Area – ARU;
- Rehabilitation requirement: renovation works on the property, proven by a construction contract or a request for prior information or the respective licensing;
- Acquisition requirement: proof of acquisition of ownership of the property, free of encumbrances and charges;
- Minimum investment required: 350,000 euros, adding up the value of the property and the value of the rehabilitation work.
We also point out that it is possible to acquire the property in joint ownership (when two or more people simultaneously hold the property rights to the same property), as long as the Golden Visa applicant meets the minimum investment requirement.
Main advantages of real estate investment for rehabilitation
With this modality, Portugal intends to continue attracting investors to the country’s real estate market, but encouraging them to restore old properties or those located in rehabilitation areas of the cities, making private initiative collaborate with the State in improving housing conditions in the cities.
For the investors, besides all the advantages, such as the possibility of legal residency and Portuguese citizenship after 5 years of maintaining the investment, the main benefit of the rehabilitation modality is its reduced value when compared to most of the eligible investments of the Program.
For example, compared to classic real estate investment (500 thousand euros) or capital transfer (1.5 million euros), the minimum amount required for investment in urban rehabilitation is significantly lower (350 thousand euros).
To make it clear, the acquisition value of the property for rehabilitation can be 300 thousand Euros, provided that the value of the works to be carried out reaches 50 thousand Euros, adding up to a total investment of 350 thousand Euros.
Or, still, you can acquire two properties of 150 thousand euros each, remembering that they have to be located in an Urban Rehabilitation Area or have been built more than 30 years ago, and carry out restoration works in these properties that exceed 50 thousand euros, also reaching the minimum amount of 350 thousand euros.
Therefore, in this Golden Visa modality the value of the acquisition of the property itself may be less than the amount of 350,000 euros.
See also the possibility to get Golden Visa through Investment Funds.
Main challenges of real estate investment for rehabilitation
If, on the one hand, the investment amount required has been considerably reduced in the case of acquisition of real estate for rehabilitation, on the other hand we cannot deny that this Golden Visa modality demands an “additional effort” from the investor to meet the other necessary requirements. Understand:
The first challenge is to find and select a property of interest to the investor, whose construction was completed more than 30 years ago or which is located in an Urban Rehabilitation Area.
In Portugal, ARUs are areas territorially delimited by municipalities that are in a situation of insufficiency, degradation or obsolescence and that justify an urban rehabilitation operation, which is led by the State’s own initiatives.
This factor, by itself, already limits the investor’s freedom to choose to invest in the acquisition of any type of property available in Portugal in order to obtain the Golden Visa.
The second challenge is to carry out restoration work on the property you are acquiring. Usually, this stage involves a prior licensing process for the work, the hiring of professionals (contractors, architects, engineers), and their monitoring.
Therefore, in this case, the investor cannot simply purchase a ready and finished property, and it is mandatory to perform the additional stage of construction on this property.
Key in Hand Solution: yes, it exists!
Don’t let the challenges discourage you, because there are now turnkey solutions on the market that are geared specifically to people who want to get their Golden Visa by investing in real estate for rehabilitation, without having to worry about construction work or finding the properties.
In these cases, interested parties can already purchase a pre-selected property that meets the legal requirements for construction time or location, along with a pre-approved licensing and contracting project.
These products can range from residential properties, buildings already planned for vacation rentals for tourists, or even options to acquire fractions within a hotel pool in a property to be renovated.
Another very attractive point is that some of these “packages” still include the property management service, that is, the contracted company can be in charge of renting your property or fraction of it to third parties.
This way, it can generate to the investor a monthly or annual income from its exploitation, an income that can be guaranteed or not, depending on the chosen product.
Finally, there are also companies in the market that ensure the “buyback” of the property sold to the client, after the 5 years of maintaining the investment required for his application for Portuguese citizenship resulting from the Golden Visa.
Despite the various “turnkey” options available in the market, it is very important to check the legal feasibility of the offers for Golden Visa application purposes, the reliability of the companies involved, in addition to paying attention to the profitability and conditions offered for exploiting your property.
This way you can be sure that you are making a safe, credible and profitable investment.
Golden Visa for urban rehabilitation in Portugal, is it worth it?
If you are interested in purchasing a property in Portugal, either to increase your equity or to obtain the Golden Visa and its advantages, it can be an excellent option.
As stated throughout this article, the Golden Visa for urban rehabilitation is one of the most affordable forms of real estate investment. Moreover, depending on the type of property purchased, the business can still be a source of income in the country.
*Article written by Tié Lenzi and originally published on the Euro Tips website. This article is merely informative. If you want more information on the subject, talk to the team of consultants at Atlantic Bridge, who are qualified to help you.