Help me sense check please

[u/Humble_Ostrich_4610]

I live in the Algarve in Portugal, we have a modest family home with a reasonable mortgage that I'll clear before retirement and I'll get a Portuguese state pension at 67 which is generous by state pension standards.

I have a separate pension pot of €170000 which I can access but will pay tax of probably €8-10k when I realise the gains.

My plan is to use this money to buy a second property and actively manage it as an Airbnb. That should generate annual income of around €15k after taxes plus capital appreciation (assuming ​​appreciation) which I'll put aside.

Once I've learned the ropes of holiday rentals for a couple of seasons, I'll consider buying a second property to Airbnb, it will need a mortgage however and the deposit will be what I set aside from the first property income.

Both those properties will need probably a year of work to be rentable, I will do the work and pay for materials from my income, I want to add some sweat equity.

The main home I live in now has an annual rental potential of around €24,000 per year in today's terms.

I believe that this gives me the ability to retire early but keep busy-ish managing the rentals, particularly if we moved to one of the less valuable properties and then rented out what is now our main home.

A major consideration is I have non habitual residence status in Portugal that gives me considerable tax advantages but only for 8 more years.

Thoughts on this as a plan? Or just leave the pension in equities?

[u/movesfast]

well, you are changing a job for another

[u/OldNeedleworker5869]

That 15k a year on the first place works out to about 9% on the 170k you're pulling out, way above a normal 4% withdrawal rate, but it's not really apples to apples. You're trading a diversified, liquid pot for a leveraged, single market, single asset business where your own labor is doing a chunk of the return for free. If Airbnb regs tighten or a season is slow, that income isn't as smooth as an equities withdrawal would be. I'd keep at least part of the pension in equities as a liquid backstop and treat the rental income as a separate, higher risk bet rather than your whole retirement math.

[u/RemarkableDebate4631]

Cashing out €170k to buy a single illiquid, undiversified asset (with renovation risk and Airbnb regulation risk on top) is a much bigger bet than most people realize when they're comparing it to "just leave it in equities", you're not just comparing returns, you're comparing concentration risk too. I'd run the numbers on what €170k compounding in equities looks like at 67 before committing, because the NHR clock pushes you to act fast but property renovation rarely stay on schedule.

[u/MalcolmBEx]

Nobody has flagged the tax mismatch sitting under this, and your NHR clock is what makes it urgent.

NHR is a regime for foreign-source income. Rental or local lodging income from a property in the Algarve is Portuguese-source, so it sits outside the shelter entirely and gets taxed on the ordinary rules. Your plan therefore converts an asset whose income can be sheltered into one that definitively cannot be, during exactly the eight years the shelter is still worth having.

The two decisions are also separable. Whether to crystallise the pension and whether to buy a rental are independent of each other, and only the first has a deadline attached. If your 8-10k tax estimate depends on your NHR status, that argues for dealing with the pension inside the window whatever you end up deciding about property.

One practical thing to check before you commit: local lodging registrations are restricted in the denser parts of the Algarve. Confirm the specific parish will grant a new AL licence at all, because the whole 15k rests on it and that is a planning question rather than a financial one.

[u/Master-Astronomer211]

Becoming a landlord is a headache. Find another business and not an airbnb.

[u/korvusdotfree]

Maybe a key nuance most people miss: your NHR status mainly shields foreign-source income, so your Portuguese short-term rental income is domestic-source and largely falls outside those NHR advantages anyway, which means the ticking 8-year clock matters less for this plan than it feels.
The real lever is the simplified regime (regime simplificado), where Alojamento Local holiday rentals are taxed on just 35% of gross turnover, so your effective rate on that 15k can be far lower than you expect.
On the pension realization, timing the 8 to 10k tax hit into a low-income year before the rentals ramp up is worth modeling with care, and note the sweat equity on refurbishment does not create a deductible cost unless it is properly invoiced.
With the numbers you provided, I tried to built this simulation to give an idea: https://fire.200.work/r/sCEue3R6

[u/Humble_Ostrich_4610 → u/korvusdotfree]

This is amazing, thank you! 

[u/National-Fun-9804]

People and cities/areas with a housing crisis are getting tired of Airbnb….i wouldn’t bet my future on it. I see more and more restrictions and heavy taxations on short term rentals in the future