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Your 1% per month in Europe for £10,000 down payment

16 de July, 2019

Your 1% per month in Europe for £10,000 down payment

Reading: 7 min

And that chic friend was “spending the vacation in the apartment in (insert name of a city in Europe or USA)”. Again. Listening to this story over and over again and due to my own limitations, I thought that (i) my friend was a millionaire or (ii) he was a loser, who spent without thinking.

In the end, neither one nor the other. It was shocking to learn that the European pied-à-terre requires much less than it supposed with return that is not found in real estate in Brazil today.

The “loser” who lives on holiday in Europe has only paid 30% of admission fees and nothing else. The financing of 70% of the property with European interest of 1.2% per year allows the rent itself to pay the instalments.

It’s become my mission to reproduce that formula. It wasn’t easy, but together with my partners we acquired land in the largest region of Porto’s universities and hospitals, approved the project, obtained the clients’ financing protocol with Banco Santander and 6 months of Silva Porto Living work.

Not only is it an affordable investment with an inflow of €10,000 with a return of 1% per month on invested capital, but it is also an excellent destination for your European holidays – Porto has accumulated awards as the best European tourist destination.

The opportunity

Silva Porto Living is a building designed to meet the huge demand of students and health professionals who need a place close to work or college.

Front type apartment

They are flats – or T0s, as they are called here – of up to 39 m2 with a high standard finish, aimed mainly at foreign students who demand quality and are willing to pay more for rent.
The buyer can make a quick work to close the room with a wooden structure or even dry wall, allowing the sharing of the unit by two people.

Rear type apartment

The architecture is modern, with a façade of floor-to-ceiling glass and from one side to the other, lots of natural lighting, with sun exposure east or west.

Comes fully equipped with full kitchen including oven, stove and dishwasher, wardrobe, air conditioning preparation and solar power.

It is anchored in the region of the University Pole just 500 meters from the beautiful Plaza of the Ark of Water, where also is the University Fernando Pessoa and its more than 4,000 students.

Porto’s complex of colleges and universities is famous in Europe, being among the best in the world in the world.rchitecture, sport, civil engineering e chemistry, farming, environmental sciences e pharmacyin addition to an excellent offer in medicine, administration and law, among others.

According to the National Institute of Statistics, there are 75,000 students enrolled in university courses in the city, most of them in the four universities of the Hub. In addition, two of the city’s most important hospitals (São João and IPO) are located in the same location.

Silva Porto Living is the ideal solution for students, health professionals or even patient companions, who can walk to the university or hospital, without prejudice to access to the main city streets and public transport.

How much it costs, how you pay, when you deliver

The apartments are being sold for €115,000. The special payment terms for Brazilians are €10,000, two intermediaries of €12,250 during the construction work and the remaining 70% financed directly with Santander, a tremendous differential for already financing during the construction work.

If you are resident in Portugal and have a European passport, the financing may reach up to 90%.

The work began in January 2019 and delivery is scheduled for the first half of 2020.

How much will the rent and return be?

The market indicates that Silva Porto Living flats will be rented for at least €700 per month (approx. R$3,000) or €8,400 per year (approx. R$36,000). The details of the study are at the end of this article.

For those who are concerned about how to manage a property at a distance, because of the explosion of tourist apartments for rent, has created in Portugal a structure of property management with complete solutions that can take care of absolutely everything related to management or even other options in which it is possible to hire the services à la carte.

With the rent at €700 euros, the expectation is to generate €4,227 per year, including expenses, commission from the Uniplaces platform, financing interest and taxes. The total investment is €34,500, generating a 12.3% year return on invested capital (€4,227 ÷ 34,500).

The rent obtained in Silva Porto will be enough to pay the installments of a financing in 30 years and still remain, that is, it is possible to acquire a property for 30% of the total price and nothing more.

The repayment of a 30-year loan requires €224 per month or €2,688 per year, which means that the property is paid for itself and there is still €1,539 per year left over.

Although we don’t count on this, the rental price has risen by about 15% per year and it is very likely that it will be higher on delivery, expected for the first half of next year.

Why rent to students?

Only 12% of the 113,813 students who study away from home are served by government housing, the rest have to turn to a market where there is not enough new supply.

The equation is simple to understand. Even if all new residential, tourist and student buildings were redirected exclusively to the student market, they would still not accommodate everyone. In Porto alone and in the student market alone, there were 3,000 new students last year for a total of 2,200 units to be built.

The student market is extremely resilient. Education can’t wait. Parents do everything they can to get the best option that their pocket allows. The size of the student market has never fallen below the level reached after the country entered the European Union.

Market research

Our estimate is that the Silva Porto Living will be rented for a minimum of €700 per month, according to the survey which indicates that high standard properties cost on average €854 per month and properties of any standard for two people are with an average of €750.

The data were obtained from a survey conducted at Uniplaces in July 2019. Uniplaces is the largest European market place for student accommodation. It is the AirBnB for students, having a complete control of the local market.

The sampling of the study is of the entire rental offer of a “complete unit” that accommodates up to 2 people, be it a room in a university residence, a flat or a 1-bedroom apartment.

On average it costs €750 per month to rent a complete space for accommodation of up to 2 people in the city of Porto.

But not all properties were born equal. There are old, precariously maintained properties in a more or less location and there are first-rate apartments in premium locations.

Classifying the offer by performance rating of the quality of the property and location, the high standard properties, including Silva Porto Living, are being rented on average for €854.

Disclaimer
The report reflects only and exclusively the personal opinion of the expert. The study is based on publicly available information considered reliable at the time of publication. The content contains estimates based on expectations that are subject to change and may not be confirmed. The addressees shall make their own analyses and take the investment decision solely on the basis of their own judgment. Although the report is free of charge, Atlantic Bridge has entered into a partnership to receive compensation in the event of a business being completed.

Author: Marcio Fenelon
Real Estate Investment

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