Should I sell or rent out my property? Pros and cons explained

Selling the property: when does it make sense?

Selling a property means giving up ownership in exchange for a one-time financial return — usually paid in full or financed by the buyer through a mortgage. This decision is often driven by the need for immediate liquidity or by favourable market conditions.

Advantages of selling your property

1. Immediate liquidity

The most obvious benefit is the ability to convert the property into a significant sum of money that can be reinvested, used to pay off debts, or saved for retirement.

2. Take advantage of market appreciation

In areas like Lisbon, Porto, the Algarve or some growing inland regions, property values have risen substantially in recent years. Selling in these conditions can mean a high return, especially if the property was acquired years ago.

3. No more ongoing costs

Selling a property frees the owner from recurring expenses such as property tax (IMI), maintenance, repairs, insurance, and condo fees — often representing considerable savings and less hassle.

4. Avoid tenant-related risks

By selling, you eliminate the potential stress of rent defaults, property damage, tenant disputes or legal issues — common risks when renting.

5. Simple legal process

Compared to ongoing rental management, the sale process is often more straightforward. Once the deed is signed and taxes paid, the owner has no further obligations regarding the property.

Disadvantages of selling your property

1. Loss of a long-term asset

Selling means giving up a valuable asset that could continue to increase in value over time. Especially in high-demand areas, holding onto a property may provide better returns in the long run.

2. Capital gains tax (CGT)

Depending on your specific case (main residence, secondary home, inherited property), you may be liable for capital gains tax. While there are some exemptions — such as reinvesting in a primary residence — it’s important to assess the tax implications carefully.

3. Rebuying may be difficult

Given today’s high property prices and borrowing costs, selling now could make it difficult to purchase a similar property in the future, especially if the proceeds are used for other expenses.

4. Emotional value

For many people, a property represents family history, memories or personal achievement. Selling can have a lasting emotional impact that shouldn't be underestimated.

Renting out the property: a source of passive income

Renting is increasingly popular among property owners who want to retain the asset but also generate income. In Portugal, rental demand remains strong — especially in urban centres, student areas, and tourist regions.

Advantages of renting out your property

1. Steady passive income

Renting generates a monthly income stream. This can help with household expenses, mortgage repayments or serve as a long-term financial cushion.

2. Asset retention

By renting, you retain ownership and benefit from potential property appreciation, while also earning rental income — a double return on your investment.

3. Tax benefits for long-term leases

The Portuguese government encourages long-term rentals by offering tax reductions on rental income. The longer the lease, the greater the reduction in IRS (personal income tax), particularly for contracts over 5 or 10 years.

4. Future flexibility

By renting instead of selling, you keep your options open — whether to sell later, use it as a second home or pass it on to your children.

5. Inflation protection

Rental income can offer better protection against inflation compared to traditional low-risk bank products, especially in times of economic uncertainty.

Disadvantages of renting out your property

1. Risk of non-payment

The biggest concern for landlords is the risk of rent default. While insurance products and legal mechanisms exist, recovering lost rent or evicting a tenant can be time-consuming and stressful.

2. Wear and tear

Tenants may not treat the property as carefully as an owner would. Over time, this leads to increased wear and higher maintenance costs between tenancies.

3. Tax on rental income

Rental income is subject to personal income tax (IRS). While long-term contracts offer reductions, short-term leases can significantly reduce net earnings due to taxation.

4. Legal and bureaucratic obligations

Leasing involves drafting contracts, declaring rental income to the tax authorities, updating insurance policies, etc. Portugal’s rental laws often protect tenants, so landlords should be well-informed or seek professional assistance.

5. Lower liquidity

When renting out, the property isn’t immediately available for sale. Even if sold with tenants in place, this could reduce its market value.

Key factors when deciding between selling and renting

The best decision will depend on your personal profile, the type and location of the property, your financial goals, and your time horizon.

1. Your personal and financial goals

Do you need cash urgently to invest, pay off debt, or start a new chapter? Or are you focused on building long-term income through asset management? Define your goals before acting.

2. Property condition and location

Properties in good condition and located in high-demand areas (urban centres, near universities or tourist hotspots) are ideal for rental. Older or poorly located properties may be better candidates for immediate sale.

3. Tax situation

It’s vital to understand the tax impact of each option: capital gains tax on sale, tax on rental income, and any potential exemptions or deductions available to you.

4. Market outlook

If local market prices are rising, holding onto the property may offer better returns in the long run. However, if stagnation or decline is expected, selling now may be wiser.

5. Time and management availability

Do you have the time and willingness to manage tenants, repairs, and legal compliance? If not, selling may provide a cleaner and simpler option.

Professional support: sell or rent with peace of mind

Whichever option you choose, having the support of a trusted professional can make the entire process smoother, more secure, and ultimately more profitable. Real estate consultants help:

• Assess your property's current market value

• Calculate potential rental yields

• Estimate tax implications (sale or lease)

• Identify the ideal tenant profile

• Promote the property effectively for either sale or rent

With Engel & Völkers, you’ll have access to a national network of consultants offering tailored support. If you're undecided, you can request a free property valuation to help assess which option provides better returns and less risk in your specific situation.

By working with an experienced real estate team, you’ll benefit from real-time market data, qualified buyer and tenant profiles, and strategic solutions to protect your investment.

Final thoughts

Deciding whether to sell or rent your property requires careful, realistic analysis aligned with your personal and financial goals. Both options can be beneficial, but each case is unique and must consider current market conditions.

If you're looking to maximise your return, reduce risks and get tailored advice, professional guidance can make all the difference. The Engel & Völkers team is here to help assess your property, explore sale or rental strategies, and find the right path for your next move.

Get in touch with us today and make the best decision with confidence and peace of mind.

Frequently asked questions (FAQ)

1. Is it better to sell or rent a property in Portugal in 2026?

It depends on your goals. If you need immediate cash or believe the property has peaked in value, selling may be the right choice. If you're looking for long-term passive income, renting — especially with a long-term lease — can be more profitable.

2. What taxes apply when selling a property?

Property sales may be subject to capital gains tax. There are exemptions in some cases, such as reinvesting the proceeds into a new primary residence. Each situation should be evaluated carefully.

3. I inherited a property. Should I sell or rent it out?

Inherited properties can be good rental investments, especially in high-demand areas. But if maintenance costs, taxes, or co-heir arrangements are burdensome, selling may be a simpler and more efficient solution.

4. Can I rent out a property that’s still under mortgage?

Yes. You can rent a mortgaged property as long as you continue meeting your loan obligations. In many cases, rent payments can even cover the mortgage instalments.

5. What are the risks of renting out my property?

Main risks include non-payment of rent, damage to the property, and legal issues. These can be mitigated with a proper lease contract, deposits, rent insurance and careful tenant screening.

6. Which option is more profitable in the long run?

Renting is often more profitable over time, as the property continues to appreciate while generating rental income. However, it requires more management and patience compared to an immediate sale.

7. Can I sell a property with a tenant living in it?

Yes, but the tenant has the right of first refusal, meaning they must be offered the chance to buy at the same price. Also, properties with tenants may sell for slightly less than vacant ones.

8. Are there tax benefits for long-term leases?

Yes. In Portugal, long-term rental contracts (5 years or more) benefit from reduced IRS rates on rental income. The longer the contract, the greater the reduction.

9. How can I find out the market value of my property?

The most accurate way is to get a professional property valuation, taking into account market data and location. You can request a free valuation from Engel & Völkers for a reliable estimate.

10. Why should I consult a real estate agency before deciding?

A reputable agency like Engel & Völkers can offer side-by-side comparisons, legal advice, promotional support, and help you define the most profitable and secure strategy — whether selling or renting.