Investing in rural Portugal: buying and remodelling to sell is a success

He discovered the wonders of central Portugal after decades in the Algarve, realising that its beautiful rural areas are increasingly on the radar of those who, for one reason or another, prefer to avoid the tourist centres and cities. It was in this forgotten region of the country, where depopulation is evident, that the co-founder of Rural Properties, Paul Rees, decided to invest. He buys, remodels and resells country houses (many of which have been empty for decades), working with investors who finance the refurbishment of the properties and then share the profits. According to him, the centre region is full of "fabulous" abandoned properties that allow the company to "succeed without the competition found in the more pressured market sectors of the Algarve, Lisbon and Porto".

The majority of renovated dilapidated rural properties are resold as main residences, holiday homes or for rent, with foreigners being the strongest audience, namely from the UK, Germany, France and (more recently) the US, since "many nationals already have access to inherited properties in rural areas".

The aim of Rural Properties, which operates in areas undergoing an unexpected renaissance, is to offer turnkey properties in a process in which buyers don't have to worry about anything. In practice, investors can capitalise on the growing demand for rural properties without the anxiety and bureaucracy of selecting, buying and renovating the spaces themselves. In this business model, as he explains, those who invest can receive a fixed interest rate or opt for a share in the profits.

Investing in rural Portugal is as much about lifestyle as it is about owning property

With a degree in marketing and two decades in business development and fundraising in the UK, Paul Rees says that all the properties the company has acquired to date are empty, sometimes for decades, and that the only difficulty in developing a business in Portugal is access to capital. The only difficulty in developing a business in Portugal is access to capital, "with banks naturally cautious after the period of excess before the 2008 crisis". For this reason, he says, the company has used private capital and intends to continue to do so.

The businessman recalls that investing in rural Portugal "is as much about lifestyle as it is about owning property". "Why spend so much money living in cities when the interior of Portugal is accessible and working from home has become acceptable? This doesn't apply to all occupations, obviously, but it appealed to enough people to have had a positive impact on rural property sales," he says.

In this interview written for idealista/news, the manager tells us what Portugal's strengths are compared to other countries and why he decided to invest in this business model in the centre of the country; detailing how it works and what the advantages are; what kind of properties clients are looking for and what the price ranges are; but also how the current context of uncertainty and government measures will (or won't) have repercussions on this property project.

Historic property Albergaria de São Pedro, Pedrógão Grande

When did you found Rural Properties?

RPF Portugal Lda, which operates as Rural Properties, was created in 2019 after I spent most of the summer travelling around the Central Region of Portugal.

What is your goal and business model?

The company's aim is to buy old properties in rural areas, villages, towns and cities, renovate them to current standards while retaining their inherent charm, and sell them on.

The business model is simple: investors lend funds to the company through a Participation Association contract and, when the property is sold, they receive the original capital plus a percentage share of the agreed profits.

Why did you choose Portugal to implement this project?

I've had family in Portugal since 1982 and moved full time to the Algarve in 2003, so I have a good knowledge of the country and its systems. I've been involved in the property sector in Portugal since I emigrated, so I understand many of the dangers and opportunities.

Portugal has a lot to offer nationals and foreigners who want to settle here, including safety, beautiful landscapes, good weather, functional infrastructures and affordable healthcare.

At Rural Properties we know about bureaucracy, pitfalls and systems that can be managed in the best way to reduce risks.

Our construction teams are managed by a highly qualified and motivated contract manager who knows the centre region well. Rural Properties' business model is unique in this growing market sector, allowing the company to progress without the competition found in the more pressurised market sectors of the Algarve, Lisbon and Porto.

House in Vale do Rio, CM-Figueiró dos Vinhos (before and after)

What are Portugal's strengths compared to other countries? And what are the biggest difficulties in developing the business in Portugal?

Portugal's strength lies in its long-standing acceptance of people from other countries, especially perhaps the United Kingdom, with whom it celebrates the 14th century Treaty of Windsor. Portugal has been a member of the European Union since 1986 and has used the euro since 1999, which has simplified investment, trade and tourism. Air connections and internal infrastructure are good and the health service, even in rural areas, is professional and accessible.

The only difficulty in developing a business here is access to capital, with banks naturally cautious after the period of excess before the 2008 crisis. For this reason, the company has used private capital and intends to continue to do so.

Some complain that services are slow, but in the interior of Portugal the team found that rural councils are encouraging, tax offices are efficient and legal services are provided by highly qualified solicitors, lawyers and notaries.

"Investors receive a fixed interest rate or can opt for a share in the profits of an individual enterprise." Can you explain?

For those investors who prefer to receive a fixed annual interest rate on their funds, this option is open. However, to date, 100 per cent of investors have been enthusiastic about the business and profit-sharing model, and are proud to see the revival of old properties.

They buy rural houses and refurbish them to sell later. What kind of houses are these? What characteristics should they have?

All the properties acquired to date have been empty, sometimes for decades. The company acquired village houses, detached cottages, an old mill, two houses that were joined and needed to be separated, and several historic properties, the oldest of which dates back to the 15th century.

Does Rural Properties handle the whole process? From house hunting to refurbishment?

The team pre-selects, visits, analyses and determines which properties to buy; this is a fundamental skill. Much depends on the projected final value of a property and the estimated cost of renovation. We often see beautiful old properties in idyllic locations, but if we feel it's not going to work, we leave.

House in Alge, CM-Figueiró dos Vinhos (before and after)

They chose the centre region to expand their business. Why?

The central region, like other rural areas of Portugal, has been subject to decades of depopulation, leaving behind thousands of empty and unwanted properties, so there is a wide variety to choose from.

There is no critical shortage of labour, skilled or unskilled, and specialist subcontractors and suppliers are well established and reliable.

Add to this mix the increase in the number of people choosing to move to Portugal's beautiful inland regions, and a new generation of buyers is emerging who are happy to pay for quality.

Why invest in rural property? What are the advantages?

The owner of a rural property will see its value increase over time, along with the property market in general, while avoiding price fluctuations that can affect the luxury market sector.

Investing in rural Portugal is as much about lifestyle as it is about owning property.

Many people who move to the interior of Portugal learn to relax, aim for a more self-sufficient lifestyle, delight in paying 40 cents for a glass of chilled wine and marvel at the lack of traffic on the well-maintained road system. For those raising children, what better place is there in Europe?

What price range are these rural properties in?

The sale prices are less than 400,000 euros. The property with the lowest price currently for sale is €75,000; an old country house that is being rebuilt as an AL investment property, just 150 metres from a river beach.

At the other end of the scale, (€360,000-€400,000,) is a historic 200 square metre (m2) villa where construction work begins this month. Located in the historic area of Pedrógão Grande, the Albergaria de São Pedro has a 600m2 garden and a hidden staircase that dates back to its original use as a hostel/hospital for pilgrims and travellers, run by the Church.

What kind of customers? Portuguese families or investors, foreigners, from which countries?

Buyers and interested parties come from the UK, Germany, France and (more recently) the USA. We have Portuguese people interested, but many nationals already have access to inherited properties in rural areas. Foreign buyers trust Rural Properties to provide fully modernised and beautifully renovated homes, as many foreigners have little experience of buying in Portugal.

Riverbeach Cottage - Horta Cimeira (under reconstruction)

What kind of properties are investors looking for?

Buyers have different types of needs, but they are all looking for a property with heating, insulation, fibre-optic internet connection, telephone signal, new bathrooms and a new kitchen. Some want a house with land, others don't.

Rural Properties' aim is to provide turnkey properties where buyers don't have to worry about remodelling anything.

Village houses are especially popular. In addition, we are working on three properties in historic areas to widen the choice for those who want to live in small towns.

Are investors looking for rural houses to invest in or to live in and/or second homes?

Buyers can be grouped into three types:

• The first and most popular type is those who want to live in Portugal full-time and are looking for a family home.
• The second type is someone who already lives in Portugal and is looking for a property to rent out for additional income.
• The third type are those looking for a holiday home.

Has the pandemic boosted business? Do more people want to move and live in the countryside?

The pandemic has changed the market and its dynamics. Many Portuguese, with existing second homes or unused family homes in the countryside, moved out of the cities and got used to working in the interior.

Foreign buyers couldn't fly to Portugal to visit properties, which certainly reduced the number of sales transactions, while prices remained stable.

The pandemic has generated some demand, but overall, the change in lifestyle and thinking has been established - why spend so much money living in cities when the interior of Portugal is accessible and working from home has become acceptable? This doesn't apply to all occupations, of course, but it appealed to enough people to have had a positive impact on rural property sales.

What effects does the current context of uncertainty have on business in Portugal?

The current Mais Habitação decree-laws on local accommodation will have little effect, since Rural Properties operates outside high-density areas.

The proposal to dismantle the non-habitual resident regime is a blow to Portugal's international credibility as a stable investment and lifestyle destination. Whether this tax regime is eliminated in 2024 or not, the damage has already been done with international headlines reporting critically on the Portuguese government's intentions.

The consensus is that doing away with this scheme will do nothing to help create housing for people on no or low incomes.