I mentioned in today’s video that I recently talked to a financial advisor in Portugal who had watched some foreign buyers get themselves into trouble.
They wanted out of whatever was happening back home, they wanted to make the move happen, and some of them got impatient enough that they overpaid.
That story probably wouldn’t have stayed with me as much if I weren’t looking at Portuguese property myself.
I’ve been investing in real estate in the U.S. for years. Normally I’m pretty unemotional about this stuff. A property either works at the price or it doesn’t.
Portugal is a little different for me.
Because I’m not just looking at an investment.
I’m looking at a place I could use, a country I could potentially spend a lot more time in, and something that could become part of a much bigger change in my life.
That’s where I can see the danger.
I’ve been evaluating a two-bedroom apartment in Cascais listed at €540,000.
I like the property. I like Cascais. And I can come up with plenty of reasons why paying a premium there might make sense.
But none of that tells me whether this apartment is worth €540,000.
So I’ve been trying to evaluate it the same way I would evaluate a property back home.
What can it realistically rent for?
What are the carrying costs?
What does the financing look like?
What happens if my plans change and I need to rent it long-term?
Who is the next buyer?
And most importantly: at what purchase price do I actually feel comfortable with the deal?
That last question is where this gets interesting.
Because there’s a huge difference between saying:
“I want this property.”
and:
“I want this property at €540,000.”
One is an emotional decision. The other is a pricing decision.
Those are not the same decision.
And I think that’s probably where experienced buyers can get themselves into trouble too.
You don’t suddenly forget how to evaluate real estate.
You just start making slightly more generous assumptions because you really want the larger thing the property represents.
Maybe the rent comes in at the high end.
Maybe appreciation takes care of it.
Maybe the premium doesn’t matter because you’re holding it for years.
Maybe you won’t care about the return because you’ll use it yourself.
Individually, none of those thoughts is crazy.
Stack enough of them together and you’ve talked yourself into a price.
That’s what the conversation in Portugal made me go back and look at.
Not whether I want the apartment.
What price makes me want the apartment?
I’m still working on that number.
— Joe