Portugal Golden Visa Investment Fund VS Real Estate: Which Costs Less

In this article, we’re going to explain the costs of both methods, as well as break down the pros and cons of each in order to help you decide which is the better fit for you.

Investment Fund: Pay Lower Fees

Real estate investment comes with expenses like transfer fees, stamp duty, or title transfer, etc. Plus, you’ll need to spend extra money on furniture, decoration, and many other unexpected things. However, with the funds, all you need to do is pay €350,000 for the subscription and you’re done. Plus, a fund subscription requires an investment of €350,000, while this amount is €500,000 for the real estate acquisition. That’s very clear. Fund investment costs way less than real estate investment.

Here is a side note, as of January 1st, 2022, the minimum investment amount for investment funds will rise to €500,000. If you’re interested in the fund subscription, you’d better hurry up.

Investment Fund: No Taxes

Real estate acquisition always has the burden of taxes, wherever you are. In Portugal, property purchase comes with an IMI transfer tax, which is six percent on average. Plus, you’ll pay a stamp duty of 0.8 percent and annual municipal taxes between 0.3-0.5 percent. Luckily, fund subscription is free of these tax burdens.

Below we’ve drafted a chart where you can see the average costs for both methods. Note that we’ve only included the €350,000 and 500,000 options for the real estate acquisition. If you’re taking the route of €280,000, the percentage for some taxes will be lower.

* Performance fee varies depending on the fund. It’s usually 20%-50% above a hurdle on the profit.

** Management fees vary on the fund, too. However, it's normally between 1%-2% of the invested amount per year.

*** Legal fees vary depending on the law firm, the number of family members, and other variables. Legal fees for both investment funds and real estate are almost the same.

Please also note that we haven’t included the government fees for the Portugal Golden Visa in this table.

Investment Fund: Hassle-Free

This is a huge motivation for many investors who have a tight schedule. They make the investment and leave the control to the fund manager. Simple. However, real estate investment comes with many responsibilities, such as renovation, maintenance, finding a tenant, etc. This is why a fund subscription can be more convenient, especially if you want to save time and effort.

Investment Fund: Quicker

As with the prospective changes on Portugal Golden Visa, it’s getting more important to start your application as soon as possible. The process for real estate acquisition is usually longer as you’ll need to spare time for house-hunting, too. With the investment fund, the decision can be made more quickly as it can easily be done remotely.

There you have it. As we’ve outlined, an investment fund is a less costly option than a real estate acquisition. However, we also want to point out some advantages that come with property investment to make this comparison more objective.

Real Estate Acquisition: More Control

Well, it’s a fact that real estate costs more than a fund subscription. However, for some investors who want full control over their investment, costs aren’t deal-breakers. If you want to control your investment on your own, a real estate investment might be a better option for you. Once you buy the property, you can decide to rent it out or live in it. With the fund subscription, you’re dependent on your fund manager.

Real Estate Acquisition: No KYC Burden

When you subscribe to a fund, you’ll need to get through the Know-Your-Client (KYC) process, which requires you to share your proof of income and the source of income. However, it’s not needed in the real estate acquisition process. This is another reason why some investors opt to take the real estate option to avoid the burden of the KYC process.

Real Estate Acquisition: More Liquid

Participation units can be sold between participants in most funds. However, as the funds are timed in accordance with the Golden Visa timeline, it’s difficult to find demand. This is why fund investments are illiquid until your fund manager dissolves the fund. With the real estate method, in case you need to liquidate your investment, you may easily do so, as long as you are willing to jeopardize your Golden Visa. Once you receive your Portuguese citizenship or permanent residence, you call the shots if and when you want to liquidate your property.

Which Is Better: Investment Fund VS Real Estate

This hugely depends on your preferences and risk appetite. If you’re not going to relocate to Portugal and only seeking a side income, real estate acquisition might work for you as it’ll drive rental income. However, if you’re looking for bigger returns that grow over time, an investment fund can be a better option. Plus, as I’ve briefly mentioned, to benefit from the current rules, you need to make a decision right away, which is more doable with investment funds.

Ready to make your Portugal Golden Visa investment but can’t decide which route to take? Please feel free to email us at info@paladintr.com for your inquiries.