It has been said that whatever the state of the economy, people go on holiday and, traditionally, the economics of a villa holiday has always seemed attractive. But even so, and if this is still the case, is it worth buying a property for rental income alone?
Firstly, investors should not be fooled into thinking that this is a big money-making business. Renting out your property can of course provide a profit, but agents in the region recommend that it should be a holiday home first and a rental investment second.
A number of local companies have registered a substantial increase in rentals over the past couple of years within the affluent areas of Vale do Lobo and Quinta do Lago, with one trend indicating that those renting are potential buyers who are taking their time to decide what property and in which area they want to invest.
In the Golden Triangle, it is estimated that a property can be rented out for around 26 weeks between Easter and the end of September, with three- to four-bedroom villas with a pool the most sought after.
Local estate agents say owners are able to ask for anything between €3,000 and €7,000-€8,000 a week, with properties in wealthy Quinta do Lago even able to command up to €12,000. During the high season, the main rental market are families with younger children or teenagers wanting to enjoy the nightlife in Vale do Lobo.
Properties within the Golden Triangle usually cost from €1.5 million, and if they are in a good development, running costs can be substantial. Aside from the communal costs involved in a resort, including security, communal pools, street lights and so on, the cost of maintaining a large villa – with a large garden, pool and mod cons – will also cut into potential income. Essentially, the simpler the property, the better the rental income.
Janette Cook at property management company TLC in Carvoeiro recommends investing in a smaller property, such as an apartment. She estimates that a property can be rented out for around 26 weeks during the spring and summer months, with a projected annual income of around €6,000 to €8,000 after cleaning and running costs, depending on size. “With an apartment, you can just lock the door and walk away from it. A nice apartment with underfloor heating or a wood-burning fire is also perfect for older couples spending the winter here, so you’re not just relying on summer rentals, you’re prolonging your season.” A location within a nice complex with its own pool would be ideal.
Finally, it is vital to use a good management company, who will help you with the laws and requirements for short-term rentals on your property.
Summing up, there are good deals to be had in the Algarve, whether it’s for rental income, your own enjoyment, or both.
By Cristina Alcock
