Golden Visas programs often are tied to property investments or investment funds. The Caveat is ordinary investors may find it difficult to understand the true benefits of investing in a fund versus buying a property.
Real Estate is suitable for those looking for stable income (through rental income) and long-term capital appreciation. Investment Funds, on the other hand, can offer both income (through dividends and interest) and capital growth, depending on the type of fund you invest in ,risks and portfolio allocation.
As of Oct 2023, Portugal has amended the golden visa law abolishing all direct and indirect investments in real estate market to protect the country from housing crisis. To be eligible for golden visa, one of the key conditions for the fund is must not invest in properties.
| Differences | Investment Funds | Properties |
| Initial investment | 500,000€ | Closed for GV |
| ROI | 8%-16% | Residential – 4%-5% Commercial – 5% to 7% |
| Liquidity | Liquid | Not Liquid |
| Portfolio | Diversified allocation | 100% Real estate |
| Costs/Fees | Subscription fee, management fee, exit fee, performance fee etc.. | Property tax, Stamp duty, Lawyer fee etc.. |
| Taxes | No | Rental income |
| Management | Fund manager | Self |
| Risk profile | High | Low |
| Experience | Prior knowledge and experience with funds required | Not required. |
Key Differences
Here are the the important differences between investing in a fund and real estate…
Safety – Property buying are safe secure transactions, however before purchase require basic fraud checks to prevent overselling. Investment funds are highly regulated by the Portuguese Securities Market Commission (CMVM), ensuring compliance, transparency, and investor protection.
Management – The management of properties is done by self or through a rental management company. Managing and decision on funds are done by professional fund managers to minimize risk achieve higher returns.
Risk – Property investments are inherently low risk hedge against inflation. As with funds, higher the risk more the reward, but you also risk losing entire investment.
Experience – A prior investment experience in trading, is required before investing in a fund. As with real estate, no prior experience needed.
Diversification – The fund allocation diversified to invest in different sectors to minimize risk. Real estate investments can spread risk by investing in multiple properties, but cannot divest from property market.
High returns – Depending on the fund, ROI can be easily 8-16% and fund can outperform real estate properties, where the rental income is modest 4-6%
Fees – Investment funds are not subjected to taxes. Real estate transactions subject to property tax, stamp duty, broker fee and other fees apply to property transactions. Investment funds are subjected to setup fee, custodian fee, management fee, performance and exit fee etc.
Taxes: Profits from funds are tax exempted. Income and capital gains from funds are tax exempted unless withdrawn.
