How to Buy Investment Property in Portugal as a Foreigner

Portugal has been one of Europe's top hotspots for foreign real estate investment for nearly a decade.

This is largely due to its stable, warm climate, strong air connections to both the EU and the US, and the attractive Portugal Golden Visa program.

The country offers a variety of investment-worthy locations, from the scenic southern coast (Algarve, Faro) to vibrant, tourist-heavy cities like Porto and Lisbon. Since 2015, Portugal’s real estate market has experienced a significant boom.

Nominal property values have surged by nearly 175%, while inflation-adjusted prices have risen by 125%.

In fact, property prices in Portugal have been increasing at a much faster rate than in the rest of Europe.

Additionally, long-term rental prices have grown by more than 30% over the past decade.

Investing in Portugal’s Real Estate Market

Buying real estate as a foreigner in Portugal is a fairly straightforward proccess. Citizenship in Portugal, the European Union, or an EEA state (European Economic Area) is not a mandatory condition for property acquisition.

You can purchase real estate either as an individual or through a company.

In Portugal, the most common business structure for buying real estate as an investment—similar to an LLC in the U.S.—is a Sociedade por Quotas (LDA).

In an LDA (Sociedade por Quotas), shareholders (quota holders) have limited liability, meaning they are only responsible for debts up to their capital contribution. The company requires at least one shareholder, making it possible to establish a single-member LDA. While there is no minimum capital requirement, most LDAs start with at least €1,000. The company is subject to a corporate tax (IRC) of 21%, along with a potential local municipal tax of up to 1.5%.

Additionally, LDAs must file financial statements annually with the tax authorities.

For long-term rentals in Portugal (over 12 months), no specific licensing is required. However, landlords must declare rental income and pay either IRS (personal income tax) or IRC (corporate tax) if the property is owned through a company.

Additionally, rental receipts (recibos eletrónicos) must be issued via the Portuguese Tax Authority (Autoridade Tributária e Aduaneira) when renting to individuals. The rental agreement must follow Portuguese rental laws and be formalized using a Contrato de Arrendamento.

For short-term rentals, such as those listed on Airbnb or Booking.com, an Alojamento Local (AL) license is mandatory. To obtain this license, property owners must register with the local municipality (Câmara Municipal), register the AL activity with the Portuguese Tax Authority, and comply with safety regulations, including installing fire extinguishers, emergency signs, and obtaining insurance. If the property is part of a condominium, the condo association may need to approve the AL license.

Short-term rental income is subject to taxation under Category B (self-employment income) or Category F (rental income), requiring annual tax reporting.

Popular Investment Hotspots in Portugal (as of 2025):

Portugal has become a notable destination for international property investors, drawn by its diverse landscapes, including scenic coastlines, historic cities, and charming countryside, along with its pleasant climate and cultural heritage.

Here are some key areas that are popular for real estate investment:

Lisbon – As Portugal’s capital and economic hub, Lisbon offers strong rental demand, a thriving business environment, and a vibrant tourism sector. The city's real estate market has shown consistent growth, making it a stable option for both residential and commercial investments.

Porto – Known for its historic charm and growing economy, Porto has become an attractive alternative to Lisbon. With increasing tourism, a strong student population, and a lower cost of living compared to the capital, Porto presents solid investment opportunities, particularly in short-term rentals and buy-to-let properties.

Algarve – Famous for its coastline, golf resorts, and mild climate, the Algarve remains a top destination for both vacationers and retirees. High demand for holiday rentals and second homes, combined with strong international interest, makes it a prime market for real estate investment.

Cascais – Located near Lisbon, Cascais is known for its high quality of life, luxury properties, and proximity to beaches. It appeals to both domestic and foreign buyers, offering strong rental yields and long-term property appreciation.

Faro – As the administrative center of the Algarve, Faro benefits from its international airport, strong tourism industry, and expanding local economy. The city offers a mix of urban and coastal properties, making it attractive for both residential and rental investments.

Setúbal – Setúbal is gaining popularity for its affordability compared to Lisbon, while still offering proximity to the capital. With its scenic coastline, growing infrastructure, and increasing interest in sustainable tourism, it presents emerging opportunities for property investors.

Sintra – Known for its UNESCO-listed heritage sites and lush landscapes, Sintra appeals to both long-term residents and tourists. The area's unique charm and cultural significance contribute to steady property demand and investment potential, particularly in high-end and boutique accommodations.

Where to Find Properties for Sale:

These two property portals are the most well-known in Portugal and account for over 95% of property listings nationwide. Be sure to check both to gain a comprehensive view of the current market.

Rental Yields

Gross residential rental yields in Portugal are above the European average. However, due to significant property price increases over the past decade, yields are not as high as those in Italy, Spain, or Greece.

Apartments in Portugal continue to offer moderate rental yields, ranging from 3.5% to 7.56%, with a nationwide average of 4.96% in Q4 2024, according to recent market research.

Note: Rental yield refers to the total percentage return a landlord earns from renting out a property, relative to its purchase price.

  • In Lisbon, Portugal’s capital and largest city, gross rental yields for apartments range between 3.5% and 7.6%, with an average of 4.45% in Q4 2024.
  • In Porto, Portugal’s second-largest city and a key commercial hub in the north, apartment rental yields range from 4.16% to 6.15%, with a city average of 4.76%. However, rental supply in Porto may be somewhat limited, possibly influenced by past real estate investment programs such as the Golden Visa.
  • In Faro, rental yields average 5.2%, while Aveiro offers slightly higher returns at 5.33%.
  • Braga reports an average rental yield of 4.86%, and Setúbal sees yields of around 5.18%.

As for rental prices, a 1-bedroom apartment in Lisbon rents for approximately €1,580 per month as of Q4 2024. One- to two-bedroom apartments typically rent for €1,580 to €2,000 per month, while three-bedroom units command an average of €2,413 per month. Larger apartments with four or more bedrooms start at €3,500 per month.

Financing for Non Residents

Foreigners do not face any restrictions when applying for a mortgage in Portugal. However, the process tends to be more straightforward for residents, as they often qualify for higher loan-to-value (LTV) ratios and have access to a broader range of lenders and financing options.

Mortgage rates in Portugal currently hover around 4%, with rates closely tied to Euribor. If securing a traditional mortgage from a Portuguese bank proves difficult, an alternative option is to apply for a business loan, though the interest rate may be slightly higher. In this case, the property being purchased would typically need to be used as collateral.

Another possibility is securing financing from a bank in your home country. However, in such cases, foreign banks often require borrowers to use a local property in their home country as collateral, as they may not accept a property in Portugal as security for the loan.

For individuals considering property acquisition under the Golden Visa program, then it is not viable anymore. In October of 2023, Portugal changed their golden visa program to not include real estate investments.

Property Visits and Preliminary Contract

If you are serious about buying, it is highly recommended to visit in person and inspect the properties yourself. Online listing photos may not always reflect reality, so it’s always best to ask the broker or seller as many questions as possible to get a clearer understanding of the property.

While a preliminary purchase agreement is not mandatory when buying or selling a property in Portugal, it can be a valuable step in the process. Known as a "Contrato de Promessa de Compra e Venda" (CPCV) in Portuguese, this agreement serves as an initial legal commitment between the buyer and seller.

It helps secure the transaction until the final deed (Escritura) is signed, providing legal clarity and assurance for both parties throughout the buying or selling process.

Due Diligence and Sales Contract 

Thorough due diligence is essential to assess the property's condition and identify any potential hidden issues or legal complications.

Engaging a lawyer or a real estate professional with experience in the Portuguese market is highly advisable. These experts can assist with reviewing and drafting purchase agreements, conducting in-depth due diligence (including verifying the title deed), and overseeing the ownership transfer process to ensure a legally sound transaction.

For higher-value properties, it is also recommended to hire a professional home inspection service from a trusted and reputable third-party company to evaluate the property's structural condition and avoid costly surprises.

Property Buying Costs and Taxes in Portugal

Buying and Selling Costs
  % from the final price Who Pays?
Property Transfer Tax 1.00% - 8.00% buyer
Legal Fees 1.25% - 2.00% buyer
Notary Fees 0.20% - 1.20% buyer
Real Estate Agent Fee 3.00% - 6.00% seller
Costs paid by buyer 2.45% - 11.20%  
Costs paid by seller 3.00% - 6.00%
ROUNDTRIP TRANSACTION COSTS 5.45% - 17.20%
Source: Global Property Guide, PWC, KPMG. Revised: February, 2025.

 Further reading: Guide to Property Taxes in Portugal

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