Why I’m Tempted To Cash Out Of This Investment (And What I Intend To Do With The Money Instead)
As they say, it can be better to be lucky than to be smart.
Best case, of course, is when you can be both.
That’s what happened in 2015 when I bought an apartment in Lagos, Portugal, at what, I can see now in hindsight, was the precise bottom of that market.
Today, about three-and-a-half years later, that apartment is worth somewhere between 50% and 100% more than what I paid for it. A colleague in the industry is fine-tuning his estimate for me as I write.
Depending on the final number, I’m tempted to cash out.
I don’t expect the Algarve market to appreciate by another 50%+ in the next three or four years. We could see some steady appreciation in this part of this country from here but nothing dramatic.
The question is, if I were to sell, what to do with the proceeds?
I’m still getting a decent net rental yield in the context of the current value—either very good or OK, depending on the actual current value.
Plus, if I did sell, I’d be on the hook for capital gains tax and real estate agency fees.
And, bottom line, I still want to own something in Portugal. While the Algarve coast may have reached a plateau, this country in general continues to offer big long-term upside.
My personal interests have shifted a little since I made that rental investment on the coast. Today, I’m thinking about a farm in an area outside the Algarve that hasn’t yet had the same level of appreciation.
What I'm Considering For My Next Purchase
A farm would be more for personal use for me and the family, but, at our Live and Invest in Portugal Conference this week, I’ve been considering agricultural properties whose harvests could produce as good a net yield as my Lagos rental has been producing.
Lots of numbers to work through still… and I find myself really on the fence about the idea of selling the Lagos holding. For me it’s always easier to make a buy decision than it is to make the choice to sell. Before walking away from a cash-flowing piece of property, I want to see strongly compelling numbers for another alternative.
Meanwhile, I have put feelers out with contacts across Portugal. I’m looking, I’ve explained, for a cash-flowing farm property somewhere beyond the Algarve. One that’s turned up already is several productive hectares with a farmhouse and outbuildings for 70,000 euros.
For Kathleen and me, one big benefit of making an investment in a new country or in a new region of country where we’ve invested already is the chance it gives us to get to know that place. Thanks to our Lagos apartment, we’ve had reason to return to that city several times and to glimpse a little beneath the surface of life in that part of Portugal.
Now we’re thinking we’d like to take a closer look at another part of this country that has really gotten under our skins.
The timing of my Lagos buy in 2015 was indeed part luck, but it was also thanks to the network of contacts I’ve invested in developing over the last 20-plus years. The friend who suggested I look at Algarve real estate back then knew the market intimately. I knew from experience that I could trust him… so I took his advice and started looking for opportunities on the Algarve coast.
Sometimes, if you’re smart, you make your own luck. Make connections… both in markets you’re interested in as well as with other real estate professionals in general and you’ll find you get lucky more often.
Lief Simon