Is it true that investment fund option is the least expensive and less risky in the long run?
Regarding the investment amounts, the real estate acquisition investment type has a minimum value of 280,000 euros, so it is cheaper than the fund investment, which has a minimum investment requirement of 350,000 euros. Regarding the security of your investment, knowing the Portuguese market, it seems to me that the safest investment will be in real estate, even though investing in funds may be more profitable in the short term.
Investment funds don’t pay taxes and only require investors to pay the fund’s subscription of 350,000 euros while real estate investment requires further expenses other than the investment itself such as transfer fees, stamp duty and other taxes. However, the minimum investment amount for investment funds, which is of 350,000 euros until Dec. 31, 2021, will increase as of Jan. 1, 2022, to 500,000 euros. The minimum investment amounts for real estate investment will remain the same as of Jan. 1, 2022: 500,000 euros or 350,000 euros if the property is at least 30 years old or located in an urban regeneration area for refurbishing. These amounts can be reduced in 20% provided that they are made in sparsely populated areas or where the GDP per person is below 75% of the national average. This means that the minimum investment amount is in fact 280,000 euros, both in 2021 and 2022. In real estate, the investor has more control over the property (they can decide to rent the property or live in it) than in investments funds. In the latter, the investor is dependent on the decisions of the fund manager. There are pros and cons in both investment routes, deciding which is better highly depends on the investors’ preferences and risk appetite.
There are several differences between investment in real estate and investment via venture capital funds. The most important one is the tax impact, as funds have neither tax impact for non tax resident investors nor acquisition or ownership taxes, which in real estate exist, up to 7.5% and 0.45, respectively. However, real estate may have more liquidity and valorization, allowing the owner to sell it at any moment, naturally depending on the market conditions. Funds are more connected with risk decisions as the investment value cannot be guaranteed and the investor cannot manage it directly. There are, however, some offers in the market that can be very appealing even to risk-adverse people.
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