Dask

Hello All
I am currently trying to work out all the costs of buying an apartment to rent out and the possible rental income vs expenses.

Trying to put a list of up front costs I might have at purchase time, if anybody has any comments or anything I might of missed it would be appreceated so I could add it in.

Figures based on a 3 Bed Apartment.

IMT - 7% € 15,400
Solicitor 1% Of Purchase price € 2,200
Deposit 10% € 22,000
Stamp Duty 0.8% Of Purchase Price € 1,760
Notary fees and Land Registration fee € 600
House rental licence (One off cost) € 600

Also what do you think of the estimations on my monthly bills as a rental

Cleaning € 200
Laundry € 50
Internet / TV € 40
Apartment management Fee € 50
Electricity € 50
Gas € 10
House Insurance € 20
Pool € 0
Garden € 0
Bins € 0
Water € 20
Accountant € 100
Property Tax 0.8% € 150
Property rental Management Fee € 85
Homeaway Booking Fees € 35


Many Thanks
J

spouse of scouse

Hi and welcome to BE. I can't comment on the figures as I don't live in Portugal, but when you're calculating your return on investment don't forget that there will be periods of time when the property isn't rented but you will still have ongoing expenses. Do you live close by the property, or have someone who can do the check-ins and check-outs? Other expenses to consider for short-term holiday lets are the cost of fully furnishing and equipping the property (everything needs to be supplied, from furniture, electrical items and bed linen, right down to the teaspoons). Have you factored in maintenance, repairs and replacement costs? Do you have someone to be on-call for tenant emergencies/questions?

Knowing your area is important too, so you can calculate your likely rental income. Researching short-term letting sites such as Home Away, Airbnb etc will give you an idea of how much you can charge for your type of property in that location. You should also check each listing's calendar to see if the property gets a lot of bookings, or if there are very few bookings at certain times of the year.

Best of luck with it all, hope it works out for you.

Dask

Thanks for your reply. Im happy to say that I have already thought about all the things you have mentioned. To finish my figures I really just need to find about more around monthly utility costs and also if I have missed any upfront costs from my list.

Then I am just waiting for my accountant to confirm what the vat rate is that we have to pay back on holiday bookings and the over all income tax rate as well. If anybody has any ideas about those as well that would be great

Loafing Along

I think you are light on your utility costs for a three-bedroomed place.
Assume possible six people using regular hot showers, air-con in height of summer, heating in winter
Gas and electricity should think €40,- and €70,- Water possibly €40,-

RichardHenshall

You've also missed the remaining 90% of the purchase price.

Loafing Along

From his 10% deposit assume €220,000 presumably got the cash

Dask

havnt forgotten about that. Just needed help around hidden costs / fees I may have forgotten and utility prices.

Andy43

Purchase costs look right, worth bearing in mind you may want to get portuguese wills thrown into the deal too.
3 bed house here, we have a handle on costs and managers in place but haven't finished getting the house ready yet so haven't rented it out... yet...
Cleaning/linen change etc is 10 euros an hour plus iva, estimated 150 euro worst case for a one week stay (8 people) inc a mid-week clean and changeover at the end.
Laundry is by weight - we will pay 2.75 per kg plus iva (I know this is at the top end of laundry costs), estimated 4 kg per person per week very roughly, so for four people you're correct. We have a washing machine and dryer set up so the cleaners can wash beach towels during the changeover clean to save some euros.
Internet/TV - 20-25 euro a month will get decent speed internet with just a few UK news channels, so add on rental for one of the IPTV boxes.
Electricity is a bit more expensive than the UK - you're probably right - we'll easily be double yours due to the pool pump and pool heating (which we will charge extra for). Aircon can eat power too.
Gas - we have a local underground tank feeding the area but it's very expensive. I'd guess yours is instant water heater and gas hob same as us but I'd still budget more than 10 euro/month.
House insurance - about right, water - not sure.
Accountant - we're paying 400/year for all tax stuff, bill paying, invoice keeping and tax returns and so on. Can probably be done cheaper but just giving the whole lot to an expert is well worth it.
Homeaway fees - 35 euro seems cheap but I have no idea as we're leaving it to the management co to advertise, do bookings, meet'n'greet etc. They take a percentage of the booking, plus we pay them a small amount per month all year round to look after the house. A professional manager is essential - we've had all sorts of maintenance work arranged so far, they seem super-hot on the legalities of renting, plus they will eyeball the guests (and what will be our home in a few years) at the start and end of a rental - no keysafes. I was told by somebody renting a florida villa that they ended up writing on the wall in marker pen behind all the pictures to stop them disappearing on a regular basis...

AliceCaroline

I agree with this.
We have a 2 bed apartment with only 2 of us living here full time, we don't use our aircon and our bills are:

Electricity €37
Metered Gas €22
Water €17

A 3 bed full of people on holiday will no doubt be much higher. But then again in the winter months when it will probably be sat empty the bills will be lower.

Dask

Thanks Andy
Seems like we are looking to do similar things, we are also looking at Lagos and usually go over a few times a year at the moment.
Thanks for the info, have updated some of my figures now.

Does anybody know if you have to pay back 23% vat on all holiday booking income?

RichardHenshall

If your Alojamento Local income exceeds 10.000€ you will have to register for IVA, which you would then have to charge at 6%. However you would be able to reclaim IVA (typically at 23%) which you've paid on necessary (and properly documented) expenditure such as utilities, maintenance , cleaning, laundry etc. In many cases you may end up eligible for repayment of IVA, though there are all sorts of hoops to go through to actually receive a cash repayment.

Despite the language barrier, you might find https://www.alesclarecimentos.pt/ helpful as an information resource.

There is a significant difference in the tax treatment (and allowable expenditure) between you actively managing your rental business/clients/suppliers (seeking and taking bookings, payments etc yourself) and passively allowing a manager/agent to do it all for you.

You may need to allow for the costs of fiscal representation as a consequence of Brexit.

GeniB

Is your apartment in a block which has a condominium agreement ? If so there will yearly charges for that
A three bed apartment we looked at yesterday.admittedly in a very expensive development .charged 4,750 euros per year on condo fees