Buy-to-Let Portugal: The Ideal Investment Opportunity

Why choose Portugal for buy-to-let investment?

Buy-to-let, also known as buy-to-rent, is a fantastic way to invest your money in property to earn a passive income, and Portugal is a popular destination.

TheMoveChannel, a leading independent international real estate portal, describes Portugal as having a rental income of 5.64 percent. Surpassing both Spain and France, Portugal has the ninth-best rental income in Europe.

In the third quarter of 2025, buying a house to rent in Portugal led to average rental yields of 6.9 percent. The Portuguese government now offers tax breaks for landlords renting homes for up to €2,300 a month, cutting the IRS (Personal Income Tax) rate from 25 percent to 10 percent.

Choosing a Property and Mortgage

Identifying the type of tenant you want for your buy-to-let property can help you determine the location and type of property to invest in. A family will have different requirements than a student, so you must consider this when choosing the type of property you want to invest in and where it is located. Portugal’s best cities, like Lisbon, Porto, and Faro in the Algarve, are popular for tenants.

Choosing the wrong location for your target tenant can make it difficult to successfully rent the property out, which can result in a loss of income. In addition to location, you will need to consider how you intend to manage your buy-to-let property. If you want to manage the property yourself, its ideal location would be near you to avoid lengthy travels to and from.

However, if you plan to use a letting agent, you are less restricted and can look at areas with a greater demand for rental properties. You can also consult with a buyer’s agent to get an idea of what’s in demand and any gaps in the property market.

In terms of rental income, you will need to ensure that you charge a rent that covers your rental costs. To do this, determine how much you’ll spend on buy-to-let mortgage payments, insurance, agent’s fees, etc. A good idea is to work out what you’ll need to pay each year and consider any periods when the property is vacant. It can help to see what rental prices other landlords and agents charge for various property types to see if you are setting your rent appropriately.

Which buy-to-let mortgage is right for you?

A buy-to-let mortgage is not the same as a residential mortgage. The amount of money you can borrow mainly depends on the income you expect to receive from the rental property. Many lenders will specify that your rental income must be a certain percentage higher than your mortgage payments.

Buy-to-let properties require a higher deposit, and buy-to-let mortgages have higher mortgage interest rates. In addition are the normal costs of purchasing a property, such as surveys of the property and legal fees, as well as a product fee that lenders often charge.

Deposits and additional costs

You must put down a deposit when purchasing a property in Portugal. For non-residents, the minimum deposit is typically 30 percent of the purchase price. Other costs include stamp duty, lawyer fees, and mortgage application fees. A general rule is to have 30-40 percent of the property purchase price available to cover these costs, as they cannot be covered through a mortgage.

Stamp duty is another cost to be aware of, and it is charged at 0.8 percent in Portugal.

Types of mortgages

Almost all mortgages in Portugal are principal plus interest loans, but banks offer fixed-, mixed-, and variable-rate mortgages. A fixed-rate mortgage means your payments will remain the same for a fixed term, even if the interest rate rises. Variable mortgages fluctuate over the long term, while the mixed rate is a combination of the two. It starts with a fixed rate, and after that period ends, the rate automatically switches to a variable rate.

With an interest-only buy-to-let mortgage, you pay only the monthly mortgage interest. So, by the end of the mortgage term, you will still owe the initial amount that you borrowed and will still be charged mortgage interest on the full mortgage balance each month until you have repaid it in full. Having all the correct property documentation in Portugal is essential if you apply for a loan.

Mortgage terms and borrower age

Maximum mortgage terms in Portugal are generally 35-40 years for residents. They depend on the borrower’s age at the time of application, for example, 40 years for those under 30 years old. For non-residents, the maximum term is often 30 years. The oldest borrower shouldn’t be older than 75 years of age at the time of the loan’s maturity.

Planning the end of the mortgage

A typical move by buy-to-let investors is to sell the property at the end of the mortgage term to cover the mortgage balance, but this comes with its own risks. For example, if the value of your property decreases due to changes in the housing market, you will still need to pay back the original amount borrowed and may face a loss. As such, it is important to have a payback plan for when the mortgage term ends.

The monthly payments for a repayment mortgage are higher, as you pay both the interest and part of the amount borrowed. The advantage of this is that you will have fully repaid your debt by the end of the mortgage period. We advise speaking with a mortgage adviser for more information and advice before choosing a mortgage.

Want to know what changed after Brexit for UK buyers? Check out our guide on buying property in Portugal after Brexit.

Managing Your Buy-to-Let Investment

How you manage your buy-to-let property will depend mainly on your aims. Do you intend to build a profit through rental income? Or are you hoping for property prices to increase so that your rental income will cover your costs until you can sell the property at a profit? Both instances require you to manage your costs effectively and understand your legal obligations and responsibilities as a landlord. Below is a list of aspects to consider.

Rental income tax

For non-residents, the flat tax rate for rental income (Category F) from long-term residential leases is 28 percent on net income. Non-residents may also earn income from short-term residential leases (Alojamento Local), which falls under Category B (business income).

Under the simplified regime for Category B, the non-resident is taxed at a flat 25 percent on a portion of the gross income, according to PWC Portugal.

For residents, rental income is typically aggregated with all other income and taxed at the progressive IRS rates, which can reach up to 48 percent. For higher earners, there is an additional solidarity surcharge.

However, for residents who opt not to aggregate their income, the autonomous tax rate for residential leases is a flat 25 percent. This is a starting rate and can have some reductions.

Note: Tax rates for long-term residential leases for residents have tiers and are subject to change. It’s best to consult with a tax advisor for an accurate tax analysis.

Capital Gains Tax

Consider the effect of Capital Gains Tax in Portugal if you plan to profit by selling the property once property prices have increased (sometimes called ‘capital growth’). As of 1 January 2023, Portugal charges residents and non-residents at a progressive personal income tax rate (IRS). Only 50 percent of the gain is taxable.

Rental yield

By calculating your rental yield, you can compare the potential profitability of different properties. You can use a local property website to compare rental amounts for properties similar to what you are considering. The steps below outline how to calculate your rental yield:

1. Calculate the potential annual rent and subtract your costs
2. Divide the result by the property value
3. Multiply by 100 to generate the rental yield as a percentage

Agent fees and right-to-rent checks

You may want to use an agent to manage the property if you don’t live nearby. Agent fees can range from 5 percent to 15 percent of the rent, depending on the degree of management service you require. A property manager can find and vet prospective renters, reduce time-consuming processes, and advertise the property on your behalf.

Visit our guide on How to Find a Property Manager in Portugal for more information.

Appliance and safety maintenance

The property should be safe for renters to live in. This can include:

• Organizing regular safety checks on all gas appliances by a registered engineer
• Hiring a qualified electrician to check that all fitted electrical appliances are safe before the tenant moves in
• Providing tenants with copies of the gas and electrical safety certificates
• Installing smoke alarms on each floor of the property
• Installing carbon monoxide detectors in rooms with fuel-burning devices, such as gas boilers and heaters
• Getting an Energy Performance Certificate for the property within seven days of putting it on the market to tenants
• Ensuring all tenants have a clear route of escape in the event of a fire
• Ensuring all furniture meets safety standards
• Fixing any broken appliances or structural faults

Tenancy contracts and deposit schemes

A tenancy contract is between the landlord and the tenant and defines each party’s rights and responsibilities. It covers the agreed rent, rules for the tenant, when rent can be increased, and what happens if either party wants to end the agreement.

This contract also describes how the tenant’s deposit is protected according to the law. This may mean depositing the money into a scheme that ensures it is available when the tenancy period ends. Not protecting the tenant’s deposit in line with the law may leave you open to legal action from the tenant.

Insurance

A condition of many mortgages is having building insurance. Consider the contents cover if you intend to rent your property out with furnishings. There is also landlord insurance that can cover your liability for loss of rent, damage done by tenants, the replacement of locks and keys, and damage to possessions that occur on the property.

Licensing and permission

If you want to capitalize on renting in Portugal, depending on the type of property, you may need permission before renting it out. You may also require certain licenses depending on how you plan to rent out your property, for example, renting out different rooms to different individuals or renting out the entire property to one family.

If you plan to rent your property out as a short-term rental, you will need to register for an Alojamento Local (AL) license. This license is issued by your local council (Câmara Municipal) and is needed for all Portugal short-term rentals. An AL license covers properties intended to be used by fewer than 50 people. For this, you need permission from the Portuguese tax authority and the local council.

Inheritance tax

In most cases, you should pay an inheritance tax after receiving a property. In Portugal, inheritance tax doesn’t exist anymore. It was replaced with Stamp Duty and applies to Portuguese assets only. You apply for a Capital Gains Tax (CGT) after you decide to sell the property for a profit.

Before 2023, non-residents were taxed on 100 percent of the gain at a flat rate of usually 28 percent. After the legal challenges, non-residents are now only taxed on 50 percent of the gain and are subject to the progressive tax scale.

Stamp Duty is exempt if the heir to the property is legitimate, such as a spouse, child, grandchild, parent, or grandparent. If the heir is not Portuguese, administration fees may apply as well, according to the Portuguese public service portal.

Again, we recommend seeking advice from a tax expert when inheriting Portuguese property.

Helping You Buy-to-Let

If you’re interested in Portuguese real estate, it’s important to remember that the amount you can borrow is influenced by whether you are a Portuguese resident or a non-resident. There are no restrictions on non-EU residents who want to buy property in Portugal.

While the government does what it can to encourage foreign investment, most Portuguese banks offer non-residents loans of around 60 to 70 percent of the property’s value or sale price. At the same time, fiscal residents of Portugal can benefit from loans of around 85 to 90 percent of the sale price.

Portuguese mortgage lenders will review your financial situation before deciding whether or not to offer you a loan. Many lenders will not allow the sum of any existing debt and new mortgage payments to exceed 35 percent of your monthly income tax. Every investor must do their due diligence according to the local tax laws.

Mortgage calculators

Most mortgage calculators consider your net borrowing, mortgage insurance, and property taxes to calculate an estimated monthly mortgage repayment. Many Portuguese banks and mortgage providers have online mortgage calculators on their websites.

Interest rates can change depending on the economic climate. Check out how much you can borrow with Goldcrest’s very own Portugal Mortgage Calculator.

Home insurance for landlords

In Portugal, you will need a minimum level of building insurance when you buy a home and take out a mortgage. Many English-speaking companies provide expat home insurance, including:

• Essential Portugal
• Inov Expat
• GED Insurance
• MDS Expat

You can also consult this article for more information: Insurance for Real Estate.

Goldcrest: How We Can Help You 

Goldcrest is a buyer’s agent that is based in Lisbon. We provide expert, impartial advice on real estate investments and how to buy property in Portugal. From scouting out the perfect property through to property acquisition, we have you covered throughout the process.

If you are looking to purchase property in Portugal, don’t hesitate to get in touch. Our team of skilled experts is available to solve all your real estate doubts, helping you with the property search and offering insightful expertise and strategic advice.

Why choose Goldcrest?

• Local knowledge: With offices located across Portugal, our presence nationwide allows us to assist you personally across the country.
• Independent service: As an independent buying agent, we do not represent any development or project. Our service is entirely tailored toward each individual client, providing you with everything you need to secure the perfect property at the best possible price. As an impartial advisor on the market, we work solely on behalf of our client and provide a service tailored to your needs and requirements.
• Streamlined process: Our real estate agents speak English and Portuguese, and our service is completely focused on providing you with a hassle-free buying experience, saving you time.
• Experienced team: Our expert real estate team has a vast local knowledge of the Portuguese property market. We have cutting-edge technology and metasearch tools at your disposal to provide full market coverage, ensuring the best investment choices and negotiated prices.
• Network of partners: We have a close network of partners, including lawyers, property management services, builders, architects, designers, and landscape gardeners, again saving you time and hassle by providing you with trusted experts in their field of work.