Our goal at Golden Homes Portugal is to help clients - those looking to acquire a Residency Permit (Investment Visa) in Portugal - make a well-informed decision regarding the Golden Visa, starting from whether the Portugal Golden Visa program is itself the right one for them or not.
However, perhaps the most time & effort consuming component of the decision is the investment decision - which investment route to choose, how much to invest, where to invest, and so on. In fact, this is why our company's proposition is to provide "SMART INVESTMENT + PORTUGAL GOLDEN VISA" - a turnkey solution uniquely tailored for our clients, according to their specific needs and expectations.
What is a "Smart Investment"?
SMART is not just about safety or returns. It is about finding the investment option that is best suited to the personal circumstances & preferences of the client - budget, preferred type of investment, risk appetite, etc.
Your reasons to apply for the Portuguese Golden Visa program - Plan B, Retirement, Emigration, Access to Europe, Second Home, etc - also can and should guide the investment decision you make. Therefore, "SMART" is different for each individual investor, and the initial process comprises many personal discussions and exchange of ideas prior to reviewing options.
In other words, there is no one “BEST” option.
The European Dream
Most of us (me included) start our journey with the aspiration (dream?) of getting a European Residency and in the process, owning a nice holiday home which can also earn some returns whenever we are not using it. I daresay a large part of the Golden Visa focussed Real Estate industry in Portugal has been built around that same dream. This implies that the dream is not just one for the pipes, it is certainly attainable.
But then we get greedy 😀 . It must also be cheap, have at least 3 bedrooms and parking, have a sea-view, must be close to Lisbon, have a guaranteed exit....This is where it becomes essential to objectively and realistically define what we really want (need?) and translate this into evaluation criteria.
Golden Visa Investment Options
To start with, it is important to remember that Real Estate is not the only investment option to qualify to apply for the Portugal Golden Visa. You can choose from at least 7 different options:
The most popular option by far, accounting for 90% of all Portuguese Golden Visa investments since inception of the programme. Provides 4 investment threshold options depending upon location and type of property - €500,000, €400,000, €350,000 & €280,000
+Tangible & Secure
+Low Minimum Investment
+Income generating +Has personal utility +Potential for upside
-High transaction cost (purchase & sale)
-High Involvement (in some cases)
Simply park the minimum amount of €1.5mn in a bank account in Portugal. You can invest the money in bank deposits, government or private sector Bonds, or even Equity
+Quickest & Easiest
+Lowest transaction cost
-High minimum investible surplus -Low/uncertain returns
Venture Fund Investment
Invest a minimum of €500,000 in an eligible Venture Capital Fund in Portugal. You can spread the investment over multiple funds as long as it adds up to €500,000
+Diversification of risk +Professional Money Managers +Low Taxes +Low Maintenance +High returns (potential)
-Riskier (by definition), erosion of capital is possible
-Uncertain returns (No redemption yet of any GV eligible fund)
Development / Restoration of Art & Culture
Invest/donate a minimum of €250,000 towards activities such as film production, museums, music, libraries, preservation of cultural heritage or monuments etc
+Lowest threshold (could even be €200k) +Favorable disposition of authorities towards this category +Potentially quicker processing times
-More donation than investment (no liquidity)
-Very few eligible options
-Single approving authority requiring stringent documentation
Contribution to Scientific Research
Contribute a minimum of €500,000 for research activities conducted by public or private scientific research institutions
+Opportunity for establishing eventual business partnerships with national institutions
-More donation than investment (no liquidity)
-Very few options to choose from
Start a Business
Set-up a company in Portugal and create, at least 10 job positions for local citizens in the country, paying at least minimum wages (~€9,000pa)
+No “minimum investment” although sufficient liquidity is required for wages, etc.
+Company can be setup in 2 weeks or so
+Double Benefit of business+GV
-Requires greater time commitment and operational involvement
-Over 5 years, the effective outflow may be close to €500,000 or more
Invest in an Existing Business
Invest a minimum of €500,000 to move / strengthen a company with headquarters in Portugal and create / keep at least 5 permanent jobs in Portugal
+Can start earning returns straight away if investing in a profitable company
+Possibility of Upside
+Leapfrog into the Portuguese economy if doing business is a goal
-Must engage bankers to evaluate and suggest target companies
-Greater risk (by definition)
-Could be operationally intensive
As is evident from the list above, the choice of investment route would depend not only on the investor’s budget, but also on their personal preferences: for a person desirous of establishing a business in Portugal, the last 2 may be attractive, for someone looking for a holiday home, real estate would be the way to go. And for yet another who is willing to see this as the price for European citizenship (rather than an investment), the donation options may be the quickest and most hassle-free.
You can read our post on the comparison of Venture Funds & Real Estate too.
Real Estate: Optimizing your decision
As mentioned before, 90+% of all Golden Visa investments in Portugal tend to be in Real Estate. And that is where the real heartburn lies, because many of us unfamiliar with Portugal, arrive with misconceptions about real estate prices. We believe the minimum thresholds for the Golden Visa are sufficient to get us ocean-facing villas for our holidays in Portugal… The reality is while real estate prices in Portugal are lower than many comparable countries, prime real estate is as “prime” as anywhere else in the world.
It is critical to understand the conditions attached to each threshold and the resultant trade-offs. Let us share a few “golden rules” (no pun intended 😉) while considering your real estate investment.
1. Portuguese Golden Visa Eligibility
The most important criterion of course is getting your resident visa. Therefore, ensuring there are absolutely no questions or risks around the eligibility of the investment for the Golden Visa in your chosen threshold/category is paramount.
For instance, we have come across cases where, technically, (and as per sound legal opinion) a property is eligible but there is a chance the rule could be interpreted another way and the evaluating officer at SEF may raise queries. Or whether works done on a property under the “rehabilitation” category would be accepted as legitimate rehabilitation. Of course, in all likelihood the queries can be answered and the investment will eventually be approved. But the question to ask is whether what seems like a deal is worth the risk of delays (or in extreme cases, lengthy legal battles).
Defining a budget always helps in narrowing the search. The budget is not necessarily defined by how much money you have and what you can afford, but should be based on how this investment will sit in your overall portfolio. If the Golden Visa investment is a small part of your portfolio, you can be more flexible with your investment choice. However, if it is a large chunk, then you need to evaluate how it affects your asset allocation. Here are some guidelines:
Don’t empty your bank on this investment. In an ideal situation, the money you invest for a Golden Visa should be the balance over and above your financial safety zone. You should always have funds that you can access easily in case of an emergency.
Assume a 7-8 year horizon for redemption of this investment. While you can exit the programme and withdraw your investment at any time (depending upon the terms of the asset you have invested in), ideally you would want to see the Golden Visa through to a PR/Citizenship. So be prepared to not have access to this money for some years.
Be aware of the conditions attached to each threshold. The higher your budget, the more the flexibility in the kind of investment you can make.
For residents of countries like India and Pakistan which have restrictions on the outward remittance of foreign currency, the limits imposed by the country often become the determining factor for the budget. For instance, an Indian Resident cannot remit more than $250,000 per financial year for investment overseas. As such, even over 2 financial years, one can only accumulate under €500,000 overseas (more here), ruling out options like Venture Fund investments, high value properties and Capital Transfer. Always consult your local tax and legal advisors before undertaking any transaction.
3. Prioritize Your Goals
The trade-offs you choose to accept will also be influenced by your goals, but it is important to rank them in order of priority. For most investors, the criteria tend to be:
Protection of Principal
Liquidity - ease/speed of divestment
Personal Involvement Threshold
Personal Use/Ownership Aspirations
Some examples of trade-offs one might face are:
Principle Protection: If Principal Protection is your priority, the “guaranteed buyback” options offered by some developers is a great route. However, these offer lower returns or upside, and limited exit routes.
Liquidity: If Liquidity is paramount, Lisbon or the Algarve are active real estate markets and can offer ease of rentability and sale, perhaps higher returns too. However as per the latest rules, residential properties in these areas are not eligible for the Golden Visa program. Moreover the minimum investment in Lisbon is €350,000. So if you prefer to own a residence in Portugal, or if your budget is limited, these options may have to be replaced by other locations.
Minimal Investment: If you want to minimise your investment, properties in the interior regions may be better value, fit in lower budgets, and can be private residences which can be rented. But they may offer lower liquidity or returns, and poorer (or different) lifestyle benefits. For instance, an investment of €400,000 might fetch you a nice estate/farmhouse in the interiors of Portugal. These may rank lower on returns or liquidity, but if as a lifestyle, your objective is to retire in relative quietude, this may be the way to go. If an oceanside holiday home is what you are looking for, €280,000 may fetch you small rooms/apartments in hotels, but typically these are overpriced, sometimes under construction (and therefore carry completion risks/opportunity costs) and carry limited liquidity options. Privately owned villas would be upwards of €500,000 depending upon the size and location, but cannot be Residential and must necessarily be licensed for Tourism services.
Minimal Involvement/Transaction Cost: Investment in hotel or aparthotel projects with guaranteed buybacks offer significantly lower transaction costs, guaranteed liquidity event, as well as minimal ongoing personal involvement in managing the investment. However, returns and control over the investment may be lower. There is also a dependence on the developer to honour the buyback promise, and lack of an open market for resale of such properties.
The Golden Visa Program in Portugal offers a diverse list of options that can suit and attract different types of investment. It is indeed possible to make a Smart Investment while also getting a Portuguese Golden Visa, which is one of the significant advantages of Portugal’s Investment Visa programme compared to other countries.
However, like with any smart investment:
One size does not fit all - there is no “BEST” option. Having correct and thorough information about each possible path to take is of utmost importance.
Don’t try to have it all - be ruthless about listing and prioritizing your criteria/goals.
As I went through the process myself, I found out that having access to objective and straightforward information became vital for my success in acquiring my own Portuguese visa, so do take some time to get as much information as possible from reliable sources, take your time, and make your own SMART choice. You may also find our posts on Tax Implications of the Portugal Golden Visa and Structuring Your Investment useful.
Best of luck! 😊
Disclaimer: This article or any content on this website, is not a substitute for legal or financial advise from a qualified professional. Please consult your advisors as well as the local laws before making any decision or taking any action.