One of our houses run as a short-term rental in the Algarve is one of the best property investments in Portugal — provided the numbers are done honestly. This article shows what an Ecoimport Wood Passive House really earns in STR, with operating costs and the energy advantage factored in.
Why STR in the Algarve
The Algarve continues to lead short-term rentals in Portugal for three structural reasons:
- A long season: strong tourism from May to October (six months) and a growing shoulder season (November to April) with digital nomads and European retirees.
- High nightly rates: averages of €120–€280 a night in high season for a two-bedroom with pool; €400–€900 a night for premium villas.
- Consistent international demand: 70–80% of guests come from the UK, Germany, France, the Netherlands and Ireland — markets less affected by Portuguese economic swings.
STR registration: the process
Every STR operation requires registration with the RNAL — National Register of Short-Term Rentals through the Portuguese single online counter. It's free, done online, and usually takes 5–15 working days. You'll need:
- Valid title to the property (deed, or a lease with sub-let authorisation)
- A compatible use permit (residential)
- The Electronic Complaints Book linked to the RNAL
- Public liability insurance (mandatory since 2018; minimum cover of €75,000 per event as set by the applicable Portaria)
Several Algarve councils have STR restriction zones — in 2026 these apply in certain parishes of Lagos, Albufeira and Portimão. It's the first thing to check before buying land intended for STR.
Real operating costs
The classic mistake new STR operators make is assuming that gross revenue is profit. It isn't. Typical annual operating costs for a two-bedroom (~85 m²) in Silves, Lagoa or Albufeira:
| Category | Annual cost | Notes |
|---|---|---|
| Cleaning & laundry | €3,500 – €5,500 | ~40–60 turnovers a year · €80–€110 per turnover |
| Management (self or agency) | €0 – €4,500 | Agencies typically charge 18–25% of gross revenue |
| Platform commissions | €2,500 – €4,000 | Booking.com 10–15%; Airbnb 14–16% split or 15% host-only |
| Maintenance & garden | €1,500 – €2,500 | Pool, garden, small repairs |
| Utilities (electricity, water, internet, TV) | €1,800 – €3,500 | Stays low in a Passive House — see next section |
| Insurance (public liability + multi-risk) | €400 – €700 | Mandatory for STR |
| Municipal tourist tax | €400 – €1,200 | Applied by some Algarve councils |
| IMI (and AIMI if applicable) | €500 – €1,500 | Depends on the VPT |
Total operating costs: €10,000 – €23,000 a year for a two-bedroom. In a premium villa (300+ m²), this can reach €35,000–€50,000 a year.
Estimated returns by layout
Conservative estimates based on real occupancy observed in the central Algarve (2024–2025), with a medium-to-high finish:
| Layout | Annual occupancy | Average ADR | Gross revenue | EBITDA* |
|---|---|---|---|---|
| Refuge 50 m² (1 bedroom) | ~62% | €95 | €21,500 | €11,000 – €13,500 |
| Family 81 m² (2 bedroom) | ~65% | €145 | €34,400 | €17,000 – €22,000 |
| Comfort 84 m² (2 bedroom, with pool) | ~68% | €185 | €45,900 | €24,000 – €30,000 |
| Spacious 142 m² (3 bedroom, with pool) | ~64% | €245 | €57,200 | €30,000 – €38,000 |
| Villa 184 m² (4 bedroom, with pool) | ~62% | €315 | €71,300 | €38,000 – €47,000 |
| Grand Villa 340 m² (5 bedroom premium) | ~58% | €560 | €118,700 | €65,000 – €82,000 |
* EBITDA = gross revenue minus annual operating costs, before depreciation, personal income tax, business taxes and financing.
The Passive House advantage
What sets an Ecoimport Wood house apart in STR is energy cost. A conventional Algarve house, with heavy air-conditioning in summer and occasional heating in winter, typically uses €1,400 – €2,200 a year in electricity alone. A Passive House with the same usage profile uses €400 – €700 a year.
The annual difference: €1,000 – €1,500 per house. Over ten years: €10,000 – €15,000 that stays with the owner. In effect, the "Passive House envelope" option pays for itself through energy savings.
There is also a reviews effect: guests respond very well to a "cool house in summer without air-conditioning running around the clock" — especially central European guests used to passive comfort. This lifts ADR and shoulder-season occupancy.
Expected annual cash flow — Comfort 84 m² STR example
- Annual gross revenue: €45,900
- Operating costs: –€19,500 (cleaning, management, platforms, maintenance, low energy)
- EBITDA: ~€26,400 a year
- Less category B personal income tax (simplified regime: 35% of turnover as taxable base, taxed at progressive IRS rates — the exact amount depends on the taxpayer's bracket): indicative estimate –€3,000 to –€5,000
- Net profit before depreciation: ~€21,000 – €23,000 a year (please confirm with your accountant)
On a total investment (land + construction + furniture + STR setup) of ~€330,000, that represents an annual yield of 6–7% — well above the Portuguese property-market average.
Conclusion
STR in the Algarve still makes sense in 2026 — provided the numbers are worked out with real costs. An Ecoimport Wood Passive House has two structural advantages: low energy costs (€1,000–€1,500 a year lower) and stronger reviews thanks to thermal comfort. Both lift net returns compared with an equivalent conventional house.
If you're considering building one of our houses for STR, we'll produce a free market study for your specific area — estimated occupancy, ADR, operating costs and a five-year projected cash flow.
Worked example: year-by-year net return on a 3-bedroom Passive House
For a fuller projection, take our Villa Algoz 3-bedroom model (128 m²) built as a short-term rental. Total investment: €350,000 (including a €90,000 plot), financed 60% with a mortgage indexed to 12M Euribor + 1.3% over 25 years, monthly instalment €1,180. Average daily rate €195 with 78% occupancy in high season and 32% in low season, giving 189 booked nights a year. Platform commissions at 15%, professional management at 20% of platform-net revenue, and the owner uses the Portuguese simplified regime (category B) with a 0.35 coefficient on STR turnover, taxed at a 28.5% marginal rate.
| Line item (€/year) | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Gross revenue (189 nights × ADR) | 36,855 | 38,700 | 40,635 | 42,665 | 44,800 |
| Platform commissions (15%) | –5,530 | –5,805 | –6,095 | –6,400 | –6,720 |
| Professional management (20%) | –6,265 | –6,580 | –6,910 | –7,255 | –7,615 |
| Cleaning (189 turnovers × €55) | –10,395 | –10,500 | –10,605 | –10,710 | –10,815 |
| Energy + water (Passive House) | –1,320 | –1,360 | –1,400 | –1,440 | –1,485 |
| IMI + AIMI (VPT ~€230,000) | –920 | –920 | –945 | –945 | –970 |
| STR multi-risk insurance | –540 | –555 | –570 | –590 | –605 |
| Maintenance + replacements | –800 | –1,100 | –1,400 | –1,750 | –2,100 |
| Accountant + RNAL fee | –780 | –800 | –820 | –840 | –860 |
| Operating EBITDA | 10,305 | 11,080 | 11,890 | 12,735 | 13,630 |
| Mortgage instalment (12 × €1,180) | –14,160 | –14,160 | –14,160 | –14,160 | –14,160 |
| Category B IRS (0.35 × revenue × 28.5%) | –3,680 | –3,860 | –4,055 | –4,255 | –4,470 |
| Net cash flow | –7,535 | –6,940 | –6,325 | –5,680 | –5,000 |
| Capital repayment (part of the instalment) | +7,850 | +8,080 | +8,315 | +8,560 | +8,810 |
| Real flow (incl. equity built) | 315 | 1,140 | 1,990 | 2,880 | 3,810 |
| Cumulative ROI on €140,000 equity | 0.2% | 1.0% | 2.5% | 4.5% | 7.2% |
These figures should be read in two ways. From a pure cash-flow perspective, in the early years the rental barely covers the mortgage — most of the return comes from equity built in the asset and from capital appreciation, which along the Algarve coast has run at 5–7% a year over the past decade. From a wealth perspective, after five years the owner holds an asset worth roughly €210,000 in equity (€140,000 initial + €40,000 repaid + estimated appreciation) plus reinvested operating flows. A €10 variation in ADR alone shifts Year 1 by about €1,900, which shows how sensitive the model is to marketing quality.
Provided for reference only. Tax, planning and RNAL rules change frequently — consult a certified accountant and Turismo de Portugal before making investment decisions.