# The wealthy's spreadsheet: The math behind the real estate deal that will change your perception.

*Or, how to multiply your capital using bank money invested in real estate in Portugal.*

Most people are convinced that to make big money in real estate, you need to start with millions or team up with your entire family to buy a building (tip: please don't do that). Well, you don't need huge capital, and it's not about finding properties below market price or a stunning kitchen renovation either.

I'm going to reveal the secret of professional investors, and it's really, really simple to execute.

A smart investor never risks all their own money; they use other people's money. **OPM: Other People's Money**  
And I don't mean starting a pyramid scheme, but rather in a legal and accessible way for anyone with a reasonable income.

## Let the bank work for you!

In fact, [The mortgage](https://portopro.net/en/blog/mortgages-in-portugal), this is the loan with the best terms you'll be able to get.

Anyone who sees the bank as a scary entity and a mortgage as a burden is missing the whole point.

> The bank is your best business partner!

To illustrate, today I'm bringing you the real numbers from one of the deals I did.  
It wasn't easy to crack, and there were gambles along the way (mainly in the form of municipal approvals that took forever).

But before we dive into the dry data, let's learn the most important concept in investments with [leverage](https://portopro.net/en/blog/real-estate-leverage-portugal) and that is: **COC cash on cash**

## What exactly is Cash-on-Cash Return, or COC for short?

If total return examines how much the entire property yields, the Cash-on-Cash metric examines something much more personal and important: **How much money your account sees back for every shekel or euro you actually spent out of pocket.**

This is the metric that shows how efficiently your equity is working, especially when taking out a mortgage or financing.

### How is it calculated?

The formula is very simple:

![Cash-on-Cash formula: Net annual cash flow divided by total actual equity invested, multiplied by 100](https://portopro.net/Blog5-formula.webp)

And now, back to the numbers behind the deal. Here is the dry data for a "Flip" project (buy, renovate, and sell):

- **Property acquisition: **€161,000, central Porto, in 2024. A floor price due to poor municipal registration.
- **Contractor, architect, and permits: **€91,500 (to make it legal and essentially demolish almost everything and rebuild).
- **Kitchen, bathrooms, furniture, and unexpected expenses: **€18,000
- **Taxation: **€4,353
- **Total project cost: €274,853.**

Our stunning property was eventually sold for-**€378,000**.

![Breakdown of flip project costs in Porto: Acquisition 59%, renovation and planning 33%, furnishing and upgrades 7%, taxation 2%, total €274,853](https://portopro.net/Blog5-costs.webp)

Now, let's talk about the big money. If we had funded the entire amount ourselves, we would have recorded a developer's profit of approximately €103,000. That's a nice return of about 37.5%. Most people would pop champagne and go to bed satisfied.

## But this is where the magic of leverage comes in.

In this deal, I didn't bring all the money from home. [I received 70% financing from the bank](https://portopro.net/en/calculator/mortgage) on the acquisition cost + renovation (based on €246,000). The bank put €172,200 on the table. We covered the rest: the remaining 30%, plus additional expenses (taxes, furniture, architect, etc.). **In total, I only spent €102,653 out of pocket.**

When our apartment sold for €378,000, we repaid the bank loan (€172,200), and were left with €205,800 in hand. Subtract the €102,000 we initially invested, and we were left with a profit of €103,147. (In this case, there was no capital gains tax).

Do you understand what happened here? We invested €100,000 and brought home over €100,000 in profit. **(Our COC here stands at a 100.4% return on equity!)**. We took our money and simply doubled it. All of this happened because we used 70% of the bank's money to generate a 100% profit for ourselves.

**Now, don't get me wrong, this is not a simple deal. It requires a lot of work.**  
Starting from locating a property significantly below market price, dealing with municipal permits, mortgages, supervising renovations, renting the property until sale (by the way, I didn't include this in the calculation, but there's an additional annual return of around 5% here), finding buyers, and negotiating. This is definitely not for everyone.

But doubling your capital (200%) is an incredible figure. I've done quite a few spreadsheets for small buildings in Porto, and none of them reached such a return.

## But! Before you rush to the bank, we must also talk about the risk.

> Leverage is like fire: it can send your returns skyrocketing, but if you're not careful, it can also burn you.

When you use other people's money, you are essentially increasing your exposure. What happens if the renovation is delayed by a few months? The interest on the loan continues to accrue each month, eating into your developer's profit?

What if infrastructure problems are discovered that push the budget beyond what you planned? Or if the market cools down a bit and it takes longer to sell the property? In leveraged deals, your margin for error shrinks significantly. Precisely because of this, **leveraged real estate development is not a casino**. It requires meticulous financial planning, wide safety margins in the budget, and tight project management that leaves no room for expensive surprises.

## Frequently Asked Questions

**What is Cash on Cash (COC) in real estate investments?**

COC is a metric that measures how much money you get back for every euro of equity you actually spent out of pocket. It is calculated as: net annual cash flow divided by total equity actually invested, multiplied by 100. Unlike the total return on the property, it shows how efficiently your capital is working, especially when taking out a mortgage.

**How does a mortgage increase returns on real estate investments in Porto?**

When the bank finances part of the deal, you invest a smaller amount out of pocket, but the profit from the property remains almost the same. In the deal described in the article, with 70% financing, an equity of €102,653 was sufficient, and the profit of €103,147 became a 100.4% return on equity, compared to 37.5% without financing.

**How much financing can you get for such a deal with a mortgage in Portugal?**

In the deal described in the article, the bank financed 70% of the acquisition and renovation costs. The actual financing rate depends on the bank, your residency, and income profile, so it's advisable to check the numbers in advance using PortoPro's mortgage calculator __LINK1__.

**What is a real estate flip deal?**

A flip deal involves buying a property, renovating it, and selling it for a profit. In the example in the article, a property in central Porto was purchased for €161,000, the total project cost was €274,853, and the property was sold for €378,000.

**What are the risks of leveraged real estate investment?**

Leverage also increases exposure. Renovation delays add more months of interest, infrastructure problems can inflate the budget, and a cooling market extends the selling time. Therefore, a leveraged deal requires meticulous financial planning, wide safety margins in the budget, and tight project management.

**Is such a deal suitable for every investor?**

No. It requires locating a property significantly below market price, handling municipal permits, mortgages, supervising renovations, renting until sale, and negotiating with buyers. Those who lack the time or a local team in Porto need professional guidance throughout the process.