Taking a slice of the tourist euro

It's a no brainer

With so many blue flag beaches, award winning golf courses, fabulous restaurants and friendly people it is no wonder that year after year thousands upon thousands of holidaymakers flock to Portugal for a week or two in the sun. Now that you own a property in this beautiful country it seems to be a no brainer to take a slice of the ever growing tourist euro by renting out your home, or homes, in the sun.

Renting out your property is a great way to help cover the ongoing costs of owning a holiday home and can prove to be a profitable enterprise. Portugal is breaking tourism records year after year and properties are in high demand during all holiday seasons.

With so many holidaymakers looking to book, you should just be able to advertise your property, take the booking and then sit back, relax and count the euros. If managed correctly then this scenario is possible, but nothing in life is quite that easy! There are a few things to consider before renting out your property and also a little bit more to do that just sit back and count the profit!

We have covered the main points below, however there are different rules and considerations for long-term rental, here we are only talking about short term holiday rentals.

Paperwork, paperwork and, yes more paperwork

Providing accommodation for rental in Portugal is seen as running a business and necessary legal requirements have to be met. To rent out your property you must have an Aljomento Local (AL) licence for each property you will be renting out. The publicity, commercial documentation and merchandising of your rental property, must show the property name followed by the AL registration number.

You will need to register your property with the local council (câmara) and comply with various requirements to gain this licence - we have listed some of these requirements below.

Your property must:

Be in perfect condition, with all equipment working properly

Be connected to the water mains or have a private, licensed, water supply system - bore hole

Be connected to the main sewage system or have a septic tank, large enough for the maximum capacity of the lodging

Have hot and cold running water

Contain at least one window or balcony connected directly to the exterior to ensure there is good ventilation

Be furnished and equipped accordingly

Have window blinds

Have doors equipped with a security system that ensures privacy

Have a fire extinguisher, fire blanket and first aid box

It is also mandatory that all properties have a Complaints Book

The requirements are reasonably straightforward, but can be time consuming to get all the relevant paperwork in place and signed off. There are local companies who can assist you with this, but pricing can vary substantially so it’s worth shopping around.

If you feel tempted to ignore getting an AL license due to the hassle then keep on reading.

Choose wisely

There are hundreds of companies in Portugal who will manage your rental property - second to real estate agencies, property management companies are probably the next most prevalent business you will find!

They will deal with everything from routine maintenance of your property, cleaning, laundry provision to meeting the rental clients at the property and making sure they are settled in ok.

However, choose wisely. Just like real estate agencies, property management companies range from highly professional and well-established businesses to fly-by-night outfits who operate without paying any attention to the law.

Before handing over the keys to your property, do some in-depth research and insist on speaking to any firm’s existing clients. Mistakes here can be costly at best, disastrous at worst.

Making money - now add tax

When you were getting your AL license in order, you will also have had to inform the tax authorities - Finanças - about starting your activity. You would have done this by registering as a sole trader, or through a company. If you are not a resident here you will need to have a fiscal representative. Although the requirement to have a fiscal representative was abolished (for EU citizens) it is still necessary if you have any income in Portugal.

Now that you have started to make money from renting out your property it’s a legal requirement to declare this to the Finanças and pay tax on your related income – regardless of where you are resident. As a rule, your tax liability will be for 28% of your net rental profit. This sounds like a significant amount, but there are plenty of related expenses you can offset against your income. It’s important to keep this in mind when calculating how profitable renting out your property will be.

Let’s keep it legal

With so much paperwork, checks and tax to deal with it may be tempting to take a “selective” approach to the legal responsibilities of renting out your property.

There will be expats who take this attitude and tell you that they’ve been renting their place out for years on the side and no-one has batted an eyelid - simply put this approach is morally wrong and very risky.

A fine for failing to obtain a rental licence could easily wipe out a year or more of rental income. The government approved the increase in fines imposed on owners of rental accommodation who operate illegally, in particular where the accommodation is unregistered and these fines range from €2,500 to €4,000 for individuals and €25,000 to €40,000 for companies.

Happy to go it alone

When you bought your property, or properties, in the sun you may have done so with the view of looking after them and dealing with the rental side of things yourself.

Taking a more hands-on approach cuts out the middle man, and their fees, and allows you to advertise your property where you want and accept bookings when it is convenient for you.

The internet proves to be a valuable resource for holidaymakers’ searching for homes to rent and thanks to sites like AirBnB, everyone has a shop-front to the world if they wish to rent out their property. Going it alone certainly maximises profits and gives you the chance to meet people from all over the world while sharing a welcome drink in front of the pool.