I interviewed a couple people who had bought a house in Portugal when I was doing the research for A Better Life for Half the Price, but this week I caught up with Suitcase Entrepreneur Natalie Sisson when I heard she had just gone through the process this summer of buying property in Portugal. She recently purchased a freestanding house just a few minutes drive from the coast for less than US$120k. She also got a crazy low rate on the mortgage.
I was recording her in order to get all the info down for this blog post, but since she’s a podcaster she recorded the whole thing on her end too for broadcast. If you’re the type that would rather listen than read, you can follow this link to get it on iTunes, Stitcher, or your alternative podcast app, or just stream it from your device by hitting the play button.
Finding a House in Portugal
There were some elements to this story that were a little surprising to me and they were all on the upside. Buying real estate in your own country can be daunting enough. Trying to buy property in a place where you don’t speak the primary language and where laws and customs are different makes it even scarier. This is why I always say to spend some quality time in a place before making the big leap. If you rent for a while and end up hating it, no strings attached if you decide to leave. If you have to sell a house in a hurry though, well, good luck with that. It’s one of the biggest investments you’ll make in your life even if you do it several times, so don’t do it until you’re got the risk/reward properly sized up.
Natalie looked at seven or eight properties but loved this house in Portugal when she first walked in. That’s usually a good sign, plus the price was right. A British couple owned it and they were in a hurry because of circumstances that came up back home. It ended up going for €107,500.
She got several rooms of furniture for another €1,000. They didn’t want to cart it all to England, she didn’t want the hassle of buying everything from scratch. (I had to do that in Mexico and believe me, it’s a royal pain. We were eating at the kitchen counter for a while and I was working on my laptop while sitting on a plastic chair.)
That’s for a three-bedroom house in good shape that’s just a few kilometers from the beach. It’s close to multiple beaches actually, including that little Peniche peninsula above where she’s been taking surfing lessons. In the other direction there are vineyards and castle villages. Natalie says the price was right so she didn’t haggle on it, that it probably could have gone for more—many comparable properties run from €130k to 200K near the coast. It needs very little work.
Still, that gives you an idea of what a bargain you can find for a house in Portugal compared to the USA, where median house prices in California equate to €352,000. Or in British Colombia, where the average home is going for the equivalent of €454,000. One recent report on runaway property price increases in some markets around the world said, “All five of Australia’s major metropolitan areas – Sydney and Melbourne, plus Brisbane, Adelaide and Perth – were assessed as ‘severely unaffordable’ for the 11th year in a row.”
Mortgages Available in Portugal
Often when talking with people moving to developing countries there’s a discussion about having to either pay for a house in full when purchasing, or borrowing against another property with a home equity loan. In countries such as Ecuador, Panama, Mexico, and Thailand, mortgages are rare. Interest rates are high if you can even get a loan and there’s usually a balloon payment due in five or seven years. Twice when I’ve bought in Mexico we had to wire the full purchase amount plus closing costs before the place was really ours.
This is not the case when buying property in Portugal. Natalie was able to put 20% down and secure a long-term interest rate of 1.95% for 25 or 30 years. That’s probably less than the rate of inflation long-term. You have to have a life insurance policy to get that rate (easy and not all that expensive), but otherwise the rate is barely over 3%—still cheap.
She says having a real estate agent used to working with expatriates was a big help and he also recommended an English-speaking attorney who made sure everything was in order and fast-tracked the paperwork. She’s paying out a few thousand euros in closing costs, which you have to assume you’ll face almost anywhere.
A Low Cost of Living in Portugal
The agent also hooked her up with a plumber and a house cleaner, both very reasonable. “The average full-time wage in the area is something like 600 euros a month, so you can imagine that makes labor costs to get work done quite reasonable,” she says. “A crew of painters is going to paint the whole interior of the house in two days for 300 euros. The plumber was here for a half hour and he charged me €15 including the part he needed. I’m finding people to be a lot more helpful than I expected. I think the cleaning lady works out to €7 or 8 an hour. There are places where it’s far cheaper than that of course, but it’s certainly affordable.”
I posted a few years back on the cost of living in Portugal, based on what I heard from other expats living there and how prices compare when you look at a site like Numbeo. I was happily surprised at how affordable the country was when I did a biking trip through Alentejo a few years ago, especially the quality wine you could get for a few euros a bottle. We ordered a bottle with every dinner because at those prices, why not? It may not be as dirt cheap as Nicaragua or Cambodia, but you don’t have to make as many sacrifices either. Good infrastructure, drinkable tap water, good health care, part of the European Union.
Getting a Long-term Visa in Portugal
Natalie is from New Zealand, but has a UK passport, so for now anyway she’s got no visa worries. The good news is, people with U.S. or Canadian passports can still manage to live here well past the usual three-month tourist restriction. It just requires ample time and money (plus patience) to work it out. There are multiple schemes in place for those who can support themselves already. Some require an investment, some require employing locals, some require you to be of retirement age. Do your homework and don’t assume you’ll find an easy answer in five minutes, but it can be done. Many have made it work already.
About That Location Independence…
Natalie Sisson was easily able to put that 20% down and pay the closing costs even though she bought an apartment last year in Wellington, New Zealand. Plus she can work in either place or any other place because of the business she has built up online. As I always say, trying to get a job where you’re going instead of taking a job (or a business) with you is much more difficult from a financial standpoint. To get the leveraged power of arbitrage, it’s best to earn money in your home currency at home and spend it in your new location where it’s worth more.
There are a lot of shysters out there who talk a good game but haven’t really proven they’ve got the experience to guide you. She’s been working hard and traveling hard for six years, earning multiple six figures working from her laptop.
Update – An Eventual House Flip
I spoke to Natalie again by e-mail while the pandemic was going on and found out she sold the house when she realized she was going to be spending more time in New Zealand instead of being nomadic.
“I actually put the house up for sale in January of 2020 and within 3 weeks it sold to a lovely Portuguese couple. We settled in April on my birthday, right before the Covid madness. And just after all the Airbnb bookings had vanished. I’m super grateful for that.”
I asked her if she had made a profit after only holding onto the house for a few years, and she definitely did.
“Yes, it was a very profitable sale,” she replied. “Prices had gone up a fair bit so it was a good move on both ends.”