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# Learn how to calculate the profitability of your local accommodation

By Joana CIDADES . 2 years
Categories :
Investing Portugal

## Find out if it pays financially to invest in local accommodation

In 2016, Portugal was the second country with the highest growth due to tourism, which contributed 9% to the Gross Domestic Product (GDP), according to the OECD report. This is the time to invest in the sector and the proof is the exponential growth of local accommodation. The key question for investors is: does profitability outweigh the business risk?

PROTESTE INVESTE has calculated the rate of return for projects in Lisbon for a period of 15 years and the year in which it begins to profit. The average annual income earned in all scenarios was 6051 euros per year, which gives 504 euros per month, a similar value to the data presented by the National Statistics Institute, which stood at 518 euros.

### Rate of Return

In this scenario we took into account an occupancy rate of 50%. This focuses on tourist areas with high demand in Lisbon. It was set an annual average price of rent based on Airbnb rates for the area in question. The values range from 108 to 138 euros per day for 2 and 4 guests in Lisbon.

#### Expenses:

• Initial investment: 150 to 200 thousand euros in Lisbon, according to number of guests (2 to 4)

• Cost of furnishing the house and carrying out works: € 10 000 for the € 150 000 property and € 12 500 for the € 200 000 property

• Taxes paid on the acquisition of the property: € 350 Municipal Tax on Onerous Transmissions of Real Estate (IMT), stamp duty and property registration

• Current annual costs (telecommunications, water, gas, electricity, multi-risk insurance, condominium, cleaning, maintenance expenses, IMI and civil protection fee): 3368 euros

• Use of rental platforms to advertise the property: average cost of 8.6% over the lease value

#### Profit calculation

- Initial cost + annual charges: 175 000 euros (cost of the property) + 11 250 (furniture + building works) + 350 euros of initial taxes = € 186 600

- Occupancy rate: 50%

- Average daily price: 123 euros

- Estimated income for the year: 123x365x50%= € 22 447,5

- Gross income rate: € 22 447,5 (property income) / € 186 600 (initial cost) * 100

Gross return rate of 12%

#### Theoretical calculation of the annual net profit:

€ 22 447,5 (estimated income) - € 3 368 (management costs) - € 1 500 (property taxes) - € 1 676 (rental tax) = € 15 931

The net return on investment will be:

15 931 / 186 000 * 100= 8,56% / per year

### How to make your local accommodation:

1. Constitute a legal entity or equivalent to the exercise of the activity of provision of accommodation services

2. Register the property in the city hall where it is located

3. Register the property in RNAL

4. Submit documentation: copy of the identification document; term of responsibility; copy of the urban property book (caderneta predial); copy of the lease contract; copy of the declaration of commencement of activity signed by the owner

5. Acquire a complaints book

6. Meet safety requirements (fire extinguisher and fire blanket, first aid equipment, indication of the national emergency number in a visible place)

7. Acquiring plate to identify the space as local accommodation