What to Know About Buying a Home in Portugal

Editor's Note: This story originally appeared on Live and Invest Overseas.

I had visions of colorful tiles … floor-to-ceiling, wood-framed windows … elaborate crown moldings … a walkout to a roomy terrace that overlooked an idyllic town square.

Luckily, my real estate agent sat me down for a frank conversation about the realities of city-center living in Tavira, a traditional town in Portugal’s Algarve region.

The noise from traffic and hundreds of service vehicles (like food-delivery trucks stopping at restaurants in the morning) ricochets up the narrow, cobblestone streets.

The cacophony continues later in the day, when tourists flock to downtown shops, eateries, and bars. Moments of peace and quiet are few and far between in the city center.

Parking ranges from difficult to impossible to find in the tourist season, and few downtown residences offer space for your car. Unwitting tourists sometimes even snag reserved spaces.

My dream of buying an older central property and renovating it was further quashed when I learned about Portugal’s bureaucracy.

You Must Do Your Homework

Paperwork, permits, the shortage of available contractors, historical façade preservation rules, antiquated plumbing and electrical systems, and issues with adjoining buildings are major hurdles to have to jump over.

My husband and I arrived in Tavira in January 2017. We moved into a modestly priced, three-bedroom condo.

While I feel very lucky to wake up in my Portuguese home every morning, it took more than good luck to get me here.

I did my homework, and I encourage all potential property investors to roll up their sleeves and do the same.

If you’re considering a property purchase in Portugal, here’s my advice.

Local Guidance Is Crucial

Buying a property in Portugal was a leap of faith that I have never regretted and the beginning of an adventure I will always cherish.

That said, the task at hand — finding a home for a retired couple on a foreign continent with a foreign currency, language, culture, traditions, and real estate market — was daunting.

My advice is to seek on-the-ground help.

I learned a lot from my Remax agent, Anabela Perez, like to measure units to determine whether the listed size included a balcony, storage area, private parking space, roof terrace, etc.

In Portugal, you can’t assume that light fixtures, indoor blinds, appliances, outdoor window awnings, or security system units will be included in what you pay for unless they are listed on the purchase contract.

In fact, if there are any fixtures you want when you buy a property, make sure they are explicit in the offer.

Find a Good Lawyer

Having a strong legal team in place is an important final piece of the property asset process.

I also learned that the same property may actually appear on different real estate sites at different prices.

Lawyers are mandatory for property purchases, and Portuguese law states that foreign buyers must have a fiscal number (similar to a Social Security number) and a registered fiscal representative.

My very qualified English-speaking attorney at Tavira Lawyers law firm set me up with a Portuguese fiscal number and handled the purchase of my condo.

He also arranged my home insurance, electric, gas, and water utility accounts. This service was included in his property purchase fee and listed in the closing costs, which were less than anything I’ve paid in the past.

Know Your Potential Legal and Tax Obligations

Portugal is a dreamy place to call home … but you need to support your dream with an understanding of the realities.

International “White List” treaties, the application of property and income taxes, and fiscal responsibilities may factor into your future.

Count on paying 7% to 8% in closing costs, including lawyer’s fees. This does not include costs associated with a mortgage.

Stamp Duty, Municipal Real Estate Transfer Tax (IMT), Deed, and Registry charges will be assessed on your final documents, but no funds will be directed to your real estate agent, who is paid in full by the seller.

Portuguese residents incorporate profit resulting from property sales into their annual income tax filing. They usually pay tax on half the total, based on their tax rate in the year their property was sold.

Note that for non-residents, closing costs absorb almost one-third of profits (generally around 28%) realized from real estate sales.

Make a Checklist of Your Personal Priorities

When you’re ready to start looking for a place to live, start by making a checklist.

Mine featured climate, medical services, accessible regional and international transportation, recreational facilities, walkable shopping and dining options, and whether the library and cinema offered English-language books and movies.

But these items reflected my goal as a permanent resident. If you intend to limit your stay or rent your property, your list may be very different.

This process eventually led me to the Eastern Algarve, but, as much as I loved the idea of a great beach, I didn’t relish the flood of vacationers that overcrowd them every summer.

A tamer, more traditional adventure was key … and Tavira was my perfect fit.

Brush up on Portuguese Real Estate Jargon

Portuguese real estate listings will use terms like T1 or T2 to describe the size of the property. The “T” represents the number of bedrooms. (So, a T0 is a studio, a T1 is a one bedroom, a T2 is a two bedroom, and so on.)

You may see the word quinta, which refers to a home on rural acreage or any property built on former farmland.

A villa is any detached, semi-detached, or townhouse that has a yard or urban land around it.

“Algarvean Cottage” refers to the traditional architectural style of this region (typically measuring about 120 square meters).

Renovation or New-Build Property?

Portugal has a range of property types available, including multi-purpose and multiple dwelling structures, store-top flats, residential condominiums, resort apartments, and more.

It’s also home to charming historical properties that are full of character. You’ll need to decide whether you’re up for a renovation project or prefer something turn-key.

The results of your renovation project could be magnificent, but personally, I wasn’t willing to put up with or pay for this process.

I decided to investigate other options and discovered “urbanizations,” which are new-build townhouses, villas, and apartments found on the outskirts of most towns.

They look a lot like North American sub-divisions … somewhat cookie-cutter and not as architecturally unique as the historic homes. But they’re built on new, wide roads, with fewer commercial outlets and traffic.

Urbanization units usually offer ample parking, more spacious rooms, built-in heating and air conditioning, elevators, modern amenities, kitchens, and bathrooms. They felt immediately familiar to me and met my needs.

Consider Your Preferences

Since moving here, I’ve been continuously impressed by the quality of municipally funded maintenance in my urbanization. Tavira takes good care of its less-central residences.

Once a week, a street-cleaning car and a crew of gardeners come to our neighborhood. Common areas are planted with flowers, bushes, and trees and are weeded and groomed. Our street is beautiful.

I especially appreciate that the condo building my husband and I chose has a security system, triple-locked heavy unit doors, a closed-in underground garage, and electric metal blinds on the outside of every window.

The blinds provide great shade in the summer, and all of these features combine for an easy lock-up-and-leave scenario. Portugal is one of the safest countries in the world, but it just feels better knowing our home is secure when we’re out of town.

All that said, every time I walk into the heart of our town, I have to admit, I look up longingly at those high windows, tiled exterior walls, and incredible carved doors…

And bustling streets can be just as appealing as quiet ones, depending on your preferences. If the hallmarks of inner-city life — noisiness and traffic — appeal to you, Algarve’s inner cities can be world-class living locations.

Be sure to consider your preferences carefully. The good news is that Portugal has it all.