On the 5th of March of 2021, we introduced our first case study competition, with the presence of the fantastic judges Hayley McKay, Manuel Alexandre Henriques, and André Braz that shared their expertise with the participants and with our team.
A brief resume of the case
The case consisted of an American real estate investor called Mr. Harvey Specter, looking to expand his assets to Portugal in 2022 with a budget of 10 million dollars and the condition to be eligible for a Golden Visa. To guarantee this deal's success, he contracted an advisor who presented him with a piece of land near Comporta (a place previously analyzed by Mr. Specter and considered an excellent business opportunity). That could be used for any type of construction with a cost of 1 million dollars.
After knowing this information, the questions were given to the participants, and they had to prepare a PowerPoint and a small pitch with their answers and their point of view of the case.
In the first question, they had to explain what changed this year in the golden visa regime and how the investor should proceed based on the changes. Then they had to decide how should the investor take advantage of the land by analyzing the possible costs, the expected return on the investment, and the pros and cons of the project.
There were a lot of good ideas, but the one that stood out the most was from The Blueprint, the team composed by Catarina Garcia, Francisco Gomes, Inês Schnitzer, and Sofia Bicho. They were able to solve the problem and present great and informed solutions quickly!
In the first part...
They clearly identified the changes that would impact the investment from Mr. Harvey Specter namely:
The minimum investment threshold to qualify for residency will increase. The investment fund amount option for the Golden Visa will change from €350,000 to €500,000.
The capital transfer amount option for the Golden Visa will change from €1 million to €1.5 million.
New real estate investment restrictions will kick in. Properties in Lisbon, Porto, and other high-density coastal towns will not qualify for property investments under the Golden Visa scheme.
Applicants have until the end of 2021 to take advantage of the current Portugal Golden Visa scheme.
In the second part...
Groups had to give wings to their imagination and create the best idea possible and thoroughly analyze it.
The winning team decided to take advantage of the land to create 45 modular homes, each with 4 bedrooms and 5 bathrooms, kitchen, and living room with a total area of 412 m2. There would also be common areas for the residents, such as a pool area, a reception, and sports infrastructures (tennis and paddle courts and yoga room).
The costs that they allocate were:
Land 1 million dollars. Utilities expenses (water, electricity, roads) 1 million dollars.
The average price for constructing and equipping houses 140 000 dollars, for the 45 houses the total cost is 6.3 million dollars.
Costs with common areas 1.7 million dollars.
Since the cost structure was already prepared, the next step was to analyze how the investor would measure his investment return. To do it, the winning team decided to use ROI (Return On Investment) to know how much the investor would gain compared to the investment made.
Firstly, it was necessary to identify the sources of future Revenues which they identified two:
Rent Yields
Tax benefits
Secondly, they identified the Costs:
Buying the land
Building properties
Building Common areas
Maintenance costs
Then they conclude that the future revenues would be higher than the costs. Therefore, the ROI would be positive and higher than 0%, which means the investor will have profit from this project.
Lastly, they were asked to analyze the pros and cons of their project.
Pros of the project:
Real estate appreciates over time.
Real estate has a unique tax benefit.
Community impact.
Reach different types of customers in Comporta;
Increase the number of available activities.
Attractiveness in the low season.
More affordable prices for a broader range of consumers.
Cons of the project:
Seasonality.
Heavy investment.
Prestigious competition.
The current owner of the plot may not accept the deal to do the lotting.
Conclusion
First of all, we would like to thank all the participating teams for their fantastic performance and the knowledge they showed on the Real Estate Market! We also must thank our fantastic judges Hayley McKay, Manuel Alexandre Henriques, and André Braz for their availability and for sharing their expertise with everyone participating and our REC team. Only one of the team could win 1st place, therefore we want to congratulate The blueprint team, for their outstanding participation in the case, being able to quickly solve the problem and present great and informed solutions!
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