At our first meeting, Danny arrived with a gleam in his eyes. “I found the deal of a lifetime,” he said, placing photos of an impressive residential building in Lisbon on the table. “I buy, renovate, and turn it into an apartment hotel. Lisbon is simply exploding! Tourists on every corner, Airbnb is making a fortune there, prices go up every quarter. I have a friend who doubled an investment in two years on short-term rental apartments.”
I asked: “Did you do in-depth market research?”
“I've been following Lisbon for a year,” he answered confidently. “And besides, I don't have time for another two-month round of checks. The market is boiling, if I don't buy now - someone else will. Believe me, this is the time.”
I recognized the pain. I know it well - the fear of missing an opportunity. The developer sees a hot market, hears success stories, and feels that every day of checks is a day when someone else snatches the deal.
Research? It sounds like unnecessary bureaucracy when the market is “obvious to everyone.”
But “believe me” is not due diligence, and “everyone's doing it” is not a strategy.
What the gut didn't tell him
I managed to convince him to give us two weeks.
“Two weeks,” he said. “I'm not willing to wait longer than that.”
We dug - not especially deep, just what needs to be done before any decision:
Market research revealed that Lisbon is indeed experiencing a tourism boom, but the specific area Danny was interested in was saturated with boutique hotels and guesthouses. The average occupancy of short-term rentals in the area: 58% - far from the ideal of 80%+ required for profitability.
Data analysis showed something worrying: prices per sq m rose 40% in three years, but yields from short-term rental fell from 9% to 5%. The market had overheated, with too much supply against the same demand.
Deeper trends: The Portuguese government had begun quietly talking about restrictions on short-term rental. There were no front-page headlines, but there was a new regulatory wind, and local residents were complaining about the housing shortage.
Regulation: We discovered that the Lisbon municipality was seriously discussing restrictions on converting residential properties into apartment hotels, precisely in the area Danny was interested in. A draft municipal bylaw was already on the table.
Supply and demand: The market was flooded. We counted 17 new apartment-hotel projects in advanced stages of construction within a radius of only 2 km.
Potential calculation: We ran the real numbers - acquisition costs, renovation into an apartment hotel, operations, Portuguese taxation, management fees, platform commissions, occupancy risks; the expected yield dropped from 14% (according to the gut feeling) to 3.2%. And in this we did not even calculate the regulatory risk, which was real.
When we presented him with the data at the meeting, Danny fell silent. “But... everyone is rushing there.”
“True,” I answered. “And many of them will lose money in the next two years.”
The real project
Instead of Lisbon, we did the work again, this time with a method. We scanned markets using clear criteria: stable economic growth, friendly regulation, a gap between demand and supply, and developing infrastructure.
We arrived at Warsaw. Not as sexy as Lisbon, but the data were convincing: multinational companies opening offices, a shortage of quality housing, clear and stable regulation, and an expected long-term rental yield of 7-8% net with a potential appreciation of 15-20% over five years.
We bought a residential project for long-term rental. Not fancy, not sexy. But grounded in data.
Three years later
The project in Warsaw returns 8.3% annually, and the property has risen 22%. Danny sleeps peacefully.
The property he almost bought in Lisbon? The investors there are now dealing with new regulation that banned new apartment hotels in the area, 45% occupancy, and a negative yield.
The message
A successful project is not a gut feeling, not “everyone's doing it,” and not fear of missing out. It is a smart and precise strategy resting on market research, data analysis, understanding of deeper trends, regulatory review, examination of real supply and demand, and a calculation of realistic potential.
It is not more work, it is different work. Work that ensures you can sleep peacefully.
Because the difference between a successful investor and one who plays roulette is not luck. It is the method.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית