What does a holiday rental in Madeira earn?
On stock Terrivio tracks, gross yield in Madeira is typically 6–9% and net yield 3–5.5% after operating costs and purchase costs. The gap is the whole story: platform fees, cleaning, management, energy, insurance, community charges and local tourist tax often absorb 35–50% of gross revenue.
Worked example: a property at €245,000 let at €110 per night with 64% occupancy books about 234 nights and €25,740 of annual revenue (10.5% gross yield). After 24% variable costs and €3,400 of fixed costs, NOI is about €16,162 — 6.1% net on a total investment of €264,600.
Seasonality — do not annualise a peak week
Madeira has a milder year-round curve than the Algarve: hiking and remote-work demand fill winter. Summer still pays more per night. 60–70% occupancy is a realistic licensed-apartment case in Funchal; north-coast villages are more seasonal.
Steep plots mean higher maintenance and sometimes weaker long-term tenant demand if STR rules tighten. Keep a long-term rental fallback in the model. Porto Santo is a different (shorter) season — do not mix it with Funchal comps.
Purchase costs and tax in Madeira
Budget about 8% above the asking price for acquisition costs in Portugal. Main item: IMT 0–7.5% (progressive) + 0.8% stamp duty. These costs are gone on day one — that is why Terrivio divides NOI by total investment, not by asking price.
Under the simplified regime, AL income is taxed on 35% of gross revenue (50% in containment zones); non-residents pay a flat 25%. Annual IMI property tax is 0.3–0.45% of the tax value.
Tourist tax: Lisbon €4 · Porto €3 per night. Usually collected from guests, but it still sits inside your competitive nightly rate.
Short-term rental rules in Madeira
AL registration applies as in mainland Portugal. The regional government can add local rules; Funchal has been tighter than rural counties. Non-resident simplified-regime tax is still 25% on the taxable fraction of AL income.
Country overlay (Portugal): An Alojamento Local (AL) registration is mandatory. The 2023 national freeze was reversed in 2024–2025; municipalities now set their own containment zones — Lisbon and Porto restrict new ALs in central parishes.
Popular towns include Funchal, Câmara de Lobos, Calheta, Santana and Porto Santo. Each has a different seasonality and licence map — Terrivio scores regulation for the exact city on a listing analysis.
How to calculate yield in Madeira
- Estimate annual revenue. Use a blended ADR and annual occupancy, not a peak-week rate. Booked nights = 365 × occupancy. Then revenue = ADR × booked nights.
- Subtract operating costs. Variable costs (platform, cleaning, management) plus fixed costs (insurance, utilities, community fees, maintenance). A starting point in Madeira is 24% variable plus the fixed costs in the calculator.
- Add purchase costs to the price. Include transfer tax, notary, registry and agency — about 8% in Madeira.
- Divide NOI by total investment. That is net yield. Compare it with your mortgage rate and with a long-term rental fallback before you bid.
Frequently asked questions
Is a holiday home in Madeira a good investment in 2026?
It depends on licence, micro-location and whether you need the weeks yourself. Typical net yields are 3–5.5%. Always underwrite net, never gross, and never assume a peak-week rate runs 365 days.
How do I calculate rental yield in Madeira?
Net yield = (annual revenue − variable costs − fixed costs) ÷ (purchase price + acquisition costs). Annual revenue is ADR × 365 × occupancy. The calculator on this page does that with Madeira defaults.
What are purchase costs in Madeira?
Plan about 8% of the price: IMT 0–7.5% (progressive) + 0.8% stamp duty, plus notary, registry and any agency fee.
Do I need a licence to let in Madeira?
AL registration applies as in mainland Portugal. The regional government can add local rules; Funchal has been tighter than rural counties. Non-resident simplified-regime tax is still 25% on the taxable fraction of AL income.