Should I Rent Out An Algarve Property?

It is one of the questions we hear most often. Sometimes it comes from owners who bought a holiday home and only manage a few weeks a year there. Sometimes it is a family house that has been inherited, or a home left behind after a move. Each time, the honest answer is the same: it depends on the property, on how you want to use it and on what you hope it will do for you.

Here is how we help owners think it through, based on more than fifteen years of looking after homes in Tavira and the East Algarve.

What are your options?

• Holiday letting: the home is registered as an Alojamento Local and welcomes guests for short stays, with dates kept free for you when you want them.
• Long term rental: the home is let to a tenant as their main residence, under a standard tenancy contract.
• Keeping it for yourself: the home stays private for you, your family and friends, with someone local looking after it while you are away.

What are the advantages of holiday letting?

A well presented home in a good location can earn more per week as a holiday rental than through a long term tenancy, especially in the high season. You keep the flexibility to stay yourself, and a home that is lived in, cleaned and checked regularly tends to stay in better condition than one that sits closed for months. Many owners also enjoy knowing that families and couples are making their own memories in a house they love.

What does holiday letting really cost?

Income is only half the picture. Before you decide, list the running costs honestly:

• management fees, or your own time if you manage it yourself
• cleaning, laundry and linen between every stay
• electricity, water, gas, wifi and television
• pool and garden care, and regular maintenance
• replacing worn items, from towels to sun loungers
• insurance, accountancy and the annual property tax (IMI)
• condominium fees, if the property is an apartment

Then add the one off costs of getting started, such as furnishing, safety equipment and professional photos. Our guide to starting a holiday rental explains each of them.

How seasonal is the East Algarve?

July and August are the busiest months, with Easter and the other school holidays close behind. Spring and autumn bring walkers, cyclists, golfers and couples who prefer quieter beaches, and winter brings guests escaping the northern cold, many of them for a month or more. Homes that are comfortable all year, with good heating, a sheltered terrace or a heated pool, can welcome guests for far more of the calendar. Our guide to the East Algarve month by month shows how the year flows.

Holiday let or long term rental?

A long term tenancy brings a steady monthly income with far less day to day work, but you lose the use of the home and tenants in Portugal enjoy strong legal protection, so it is a long commitment. Rental income from a tenancy is also taxed differently from holiday letting. A holiday rental has higher potential income and keeps the home available to you, in exchange for more work, more running costs and income that changes with the seasons. Neither is right for everyone, and the choice often comes down to how much you want to use the property yourself.

Which questions should you ask yourself?

• How many weeks a year do you really want to spend there, and when?
• Are you comfortable with other people staying in your home?
• Is the property suited to guests, or would it need investment first?
• Do you live close enough to manage it, or would you need a local team?
• Would you rather have a predictable income or a higher but variable one?

What makes a home perform well in Tavira?

In our experience, the homes that do best combine a good location, a private pool or attractive outdoor space, comfortable beds, a well equipped kitchen and photos that show them at their best. Reviews matter enormously, and they come from attentive, local service. Direct bookings help too: guests who book with us directly receive Smarta+ vouchers for local experiences, and many of them come back to the same house year after year.

How can we help you decide?

We are always happy to look at a property and give an honest opinion, even if the answer is that holiday letting is not the best fit. If you go ahead, our AL licence guide explains the registration, our guide on how to choose a property manager lists the questions to ask, and our owners page shows how we work. Or simply contact our team in Tavira and tell us about your home.

Frequently asked questions

Is holiday letting profitable in the Algarve?

It can be, but it depends on the location, the property, how long the season is for that home, the running costs and how well it is managed. Nobody can honestly guarantee a figure in advance.

The most useful starting point is a realistic estimate based on similar homes nearby. We are happy to share our view for your property, with the costs included, before you decide.

How much could I earn from my property in Tavira?

Income varies widely with the size and type of home, its location, the pool and outdoor space, the presentation and how many weeks you keep for yourself.

A two bedroom apartment in the old town and a large villa with a pool in the countryside work in very different ways. Tell us about your home and we will give you an honest picture.

When is the best time to start letting?

Ideally, have the home registered, photographed and online by early in the year, when many families book their Easter and summer holidays.

That said, the East Algarve welcomes guests in every season, so a home that is ready in autumn can start with winter sun stays and build reviews before the summer.

Is a long term rental better than holiday letting?

Not necessarily. A long term rental is simpler and steadier, while holiday letting usually has higher potential income, more costs and more flexibility for your own use.

If you want to spend time in the house yourself, holiday letting is usually the better fit. If you will not use it for years, a long term tenancy may suit you, and an accountant can compare the tax for each.

Do I pay tax on holiday rental income in Portugal?

Yes. Income from a holiday rental in Portugal must be declared, whether or not you live in the country, and the annual property tax (IMI) still applies.

The amount depends on your residence, how the property is owned and your other income, so speak to a certified accountant before you start. Our guide to starting a holiday rental covers the basics.