What real estate fund should you choose when applying for a Portuguese golden visa?

If you are planning to apply for a Portuguese residence permit by investing in a real estate fund, you may have trouble choosing which one to put money in. This would not be surprising at all, as the choice is extremely wide. Below we list all available options. Please read on and then apply for a personal consultation with an InternationalWealth expert who will be happy to help you select the most reliable real estate fund in Portugal thus acquiring the so-called ‘golden visa’ to Portugal that is essentially a legal residence permit.

How can you acquire a golden visa by investing into a real estate fund in Portugal?

In 2018, the Portuguese Parliament passed a piece of legislation that allows foreign nationals to invest into a venture fund (or FCR — Fundo de Capital de Risco) thus qualifying for a golden visa to the country. The Fund has to have its headquarters in Portugal and invest at least 60% of its capital in Portuguese-based companies. The foreign investor has to put at least 350,000 euros into the fund and he or she can receive the payback at least five years after the investment is made.

The expression ‘venture fund’ may sound somewhat frightening but this is only a term for an investment fund managed by experienced professionals. They choose the most promising Portuguese startups and invest money in them to help them grow fast.

Every fund has its own investment areas and scope of authority. Different funds make investments into the energy sector, heavy industry, modern technologies, or real estate. All funds are regulated by the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários; CMVM).

Who is eligible to apply for a Portuguese golden visa by investing into a venture fund?

The scheme called Autorização de Residência para Actividade de Investimento in Portuguese defines the criteria that the candidate for the Portuguese golden visa has to meet in order to qualify. The candidate shall have to following characteristics:

• Be a non-EU/ EEA and non-Swiss citizen;
• Be a law-abiding person (have a clean criminal record).

The Funds may have their own requirements for the candidates as well. These requirements usually include the following ones:

• The candidate must have some experience in investments and some knowledge of financial instruments such as company shares, state bonds, funds, and so on.
• The candidate must confirm having sufficient funds.
• The candidate must be able to prove the legality of the sources of income.

We realize that acquiring a legal residence permit in Portugal by putting money in a fund may look riskier and more complicated than simply buying a villa or an apartment in the country. However, you can save up to 150,000 euros if you choose this route as the required investment amount is 500,000 euros if you decide to put money directly into real property in Portugal.

Besides, choosing the piece of property to buy is not an easy task too as the choice is large indeed. So if you are familiar with investment mechanisms and various financial instruments, and if you realize that the funds are managed by professionals, this option should be interesting for you.

Of course, any investment will entail certain risks and an investment into a Portuguese real estate fund is not an exception. InternationalWealth experts will gladly assist you in assessing the risks involved in investing in any particular fund in Portugal.

The amount of required investment in a Portuguese real estate fund is expected to grow

Only a short time ago various rumors about the possible changes to the Portuguese golden visa legislation were in circulation. Everything became clear and certain in February 2021 when the parliamentarians passed all the amendments that they had been discussing. In Particular, acquiring legal residence in Portugal by purchasing real estate in large cities/ popular regions (Lisbon, Porto, Algarve) has become impossible.

The amount of the required investment in Portuguese real estate funds has also been raised from 350,000 to 500,000 euros. The good news is that the amendment comes into force on January 1, 2022 so you still have time to acquire a Portuguese golden visa at a reduced price.  

Please remember that the money will have to be ‘frozen’ for five years. This is the period required for naturalizing in Portugal and exchanging your golden visa into a Portuguese passport. Of course, you can exit the position before the five-year period expires but you will lose the golden visa in this case. Investors in Portuguese real estate funds can count on 3-5% annual profit if things go well.

Please also bear in mind the fact that the minimum share price can vary from one fund to another (it can be between 50,000 and 500,000 euros). Besides, every find will have its own requirements as to the share ownership period and this does not always coincide with the five-year naturalization period 9it can be anywhere between 3 and 10 years).

The following costs are involved in acquiring a golden visa to Portugal by investing in a real estate fund:

• Administrative fee: 1% -5% of the investment amount;
• Annual fund management commission: 0.75% — 2.75% of the investment amount;
• Additional legal costs;
• Efficiency commission: Payable if the fund is liquidated;
• Administrative fees for acquiring a legal residence permit in Portugal by investing into a real estate fund: Payable to the Portuguese Foreigner and Frontier Service (Serviço de Estrangeiros e Fronteiras; SEF) in the following amounts:
  • Initial application processing fee: 532.70 euros for the main applicant and 83.10 euros for every dependent family member;
  • Initial application approval fee: 5,274.40 per each applicant for legal residence;
  • Application for investment period prolongation: 532.70 euros for the main applicant and 83.10 euros for every dependent family member;
  • Approval of application for investment period prolongation: 2,637.20 euros for one applicant.

Investment into a Portuguese real estate fund: a popular and secure route to legal residence in the country

According to the official statistics, 4% of all residence permits issued to foreigners in Portugal in 2020 were issued to the investors in real estate funds. The number of residence permits granted to this category of investors grew by almost six times in comparison to the previous year.

In 2017, the Portuguese authorities lowered the required amount of investment in a real estate fund from 500,000 euros to 350,000 euros. This measure served as a considerable incentive for foreign investors whose number grew year after year since that time.

Is it safe to invest in a Portuguese real estate fund? In accordance with the local legislation, any such fund must be in conformity with the requirements out forward by the Comissão do Mercado de Valores Mobiliários. External audit companies regularly audit these financial institutions.

In any case, it is important to assess the investment strategy that the chosen fund follows and find out about the track records of the fund managers. Remember that there is no 100% guarantee that your money invested in a Portuguese real estate fund will be perfectly safe.

You can assess the risk by yourself but assistance from qualified professionals in the matter would be invaluable. InternationalWealth team of experts will be happy to provide such assistance to you.

Choose the real estate fund to invest in thus obtaining legal residence in Portugal

Below we list all the financial institutions that you can invest in thus qualifying for legal residence in Portugal. All the funds are certified and controlled by the CMVM. The list does not include the funds that are currently undergoing liquidation procedures.

Please mind that not all structures may be suitable for investments at this moment in time (see the selection criteria below) but the satiation may change in the mid-term. Please request the most up-to-date information from InternationalWealth experts!

Notes: Letters (F) and (A) stand for closed and open fund (Fechado / Aberto). The abbreviation SGOIC (Sociedade Gestora de Organismos de Investimento Coletivo) stands for a collective investment management company.

How to choose the optimal real estate fund for acquiring legal residence in Portugal 

An increasing number of our clients are interested in the golden visa opportunity described here. Not surprisingly, we hear the following question more and more often: What real estate fund should I choose to acquire legal residence in Portugal? Below please find the key criteria for choosing the optimal fund to invest in:

• The fund managers must invest at least 60% of the assets into Portuguese-based companies/ objects.
• The fund headquarters must be located in Portugal.
• The payback period must exceed five years.
• The fund must qualify as a Fundo de Capital de Risco. This means that you can invest only in a risk capital fund that possesses the following main characteristics:
  • The fund portfolio must be diversified: no single asset/ company shares can prevail.
  • The fund must not guarantee the return on investment (unlike is the case with the state bond dividends, for instance).

What should you pay heed to when considering what real estate fund to out your money in if you want to use this route to the Portuguese golden visa? InternationalWealth team takes a long list of factors into consideration when assessing the possible investment options. Below we briefly describe the most important ones.

Strategy

The following key aspects need to be taken into consideration when working out an investment strategy:

• Asset localization and type:
  • Are the investment objects located on the territory of large cities or in gentrification regions? Are they close to hospitals, universities, airports, and so on?
  • What types of assets are invested in (stores, warehouses, office buildings, residential accommodations, ect.)? How profitable can these investment objects be?
• Expected income:
  • What is the expected level of income?
  • Are annual dividends going to be paid?
• Target capital amount:
  • How much is the fund planning to accumulate? How realistic is the target capital amount?
• Maintenance costs:
  • What is the annual management fee?
  • What happens if and when the fund is liquidated?
  • Are there any additional fees?
• Portfolio diversification:
  • Does the fund have a diverse portfolio that can minimize the risks?
• Exiting the position:
  • What happens if you would like to call off the investment?

You can compare several Portuguese real estate funds along these lines and develop an understanding of the situation in the market. You are also welcome to consult independent experts such as InternationalWealth professionals, for example and discuss the most efficient investment strategy with them.

Life cycle

Before making the investment, you should certainly find out for how long your money is going to be ‘frozen’. By all means, obtain information about the following key dates:

• Fund registration with the CMVM;
• End of subscription;
• Fund liquidation/ settlement.

Please bear in mind that any fund will have a liquidation date. You have to find out if the fund manager is authorized to extend the life cycle of the fund and for how long. As a subscriber, you will not have the power to do so and thus you will have less flexibility when investing into a real estate fund than you would have purchasing property in your own name.

Fund manager

The fund manager will be in charge of your money until the settlement date. As you will have to rely on this person, it would be a good idea to learn about him or her as much as you can. You will have to assess the manager’s skills and abilities by finding out about their success story.

If possible, you had better meet the manager in person and ask the questions that you might have. Does he/ she look trustworthy? Does he/ she have sufficient experience in investing other people’s money? Do your personal interests coincide with his/ hers?

You should not be surprised if the fund manager is in for a large sum of money in case the fund is successful. The manager’s reimbursement is in direct relation to the fund’s profit, which stimulates him or her to work as diligently as they can.

Expert support in acquiring legal residence in Portugal by investing in a real estate fund

InternationalWealth is an Internet portal offering a wide range of services to those interested in investment immigration and other offshore instruments. You can make use of our packaged services that will be tailored to your needs. We will be happy to assist you in acquiring a legal residence permit or full citizenship in many different countries.  

The Portuguese golden visa is one of the most popular immigration products in the market. The possibility to invest in a real estate fund in the country is one of the most affordable ways to become a legal resident in Portugal and in the EU. But remember, that the required investment amount will grow from 350,000 euros to 500,000 by the end of the current year! There is no time to waste!