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anybody looked into mina casa?

Discussion in 'Brazil Property' started by globalinvestor, Jun 1, 2010.

  1. globalinvestor

    globalinvestor New Member

    anybody looked into mina casa? the affordable housing cheme?

    any success stories?

  2. JMBroad

    JMBroad New Member

    The vast majority of what I do is MCMV (Minha Casa Minha Vida) - as Rob said - what would you like to know?
  3. globalinvestor

    globalinvestor New Member

    i heard that growth could be limited because you can't resell at too high a price or it would not meet mina casa requirements?

  4. JMBroad

    JMBroad New Member

    The appeal of MCMV isn't the growth it's the speed and the security. As there is a huge waiting list of people waiting to buy, the exit strategy is very secure and the wait between completion and sale is normally very short.

    Yes the "growth" is capped - in fact pretty much the only way someone can realistically participate in a MCMV project and make money is either as a developer, financing a developer or as a bulk investor.

    The challenge of MCMV is that while there is a huge waiting list the buyers are also picky and are looking for the best possible development in the best location for them, preferably close to their place of work.

    The other challenge is that as mentioned investors can't increase the price beyond a set limit - this means that for an investor to make any money they need to buy below the realistic market value. The challenge is finding a developer/development that is willing to share profits on a MCMV development with an investor.

    I've seen a couple of MCMV being offered to overseas investors but so far I've only seen units being offered at the same price as they will resale to the local market so by the time you've factored in the purchasing costs and capital gains tax there is a loss to the operation instead of a profit.

    We used to sell to bulk investors (minimum 100 units) but because of the huge demand we now only deal with a maximum of two investors per development.
  5. JMBroad

    JMBroad New Member

    So you are financing the developer to help build a MCMV development, not actually buying a unit which you will later have to resell? That sounds more plausible with regards to actually getting a profit back as long as the development actually gets built. Check what people tell you. If they say they have done developments in the area before - double check that they actually have delivered developments and are who they say they are...

    Get an independent Due Diligence done on the development and the developer to ensure that they own the land, have all the necessary licenses and actually intend to build the development - basically everything as in the "Absolute Basics" thread - even though you are not buying a unit, you are still investing so make sure you do your homework on the company.

    I have come across a couple of "investment" opportunities like the one you've mentioned and all I can say is I hope you are looking at ones I haven't seen yet. With the ones I've been shown, despite claiming to be richer and more knowledgeable than Warren Buffet and Bill Gates put together, in reality the "Developer" is a former sales agent, has never been involved in development before, doesn't own the land they are claiming they will build on, doesn't have any licenses and has no experience. Not somewhere I'd personally invest.

    No matter what you are investing in and where - make sure you check as much information as you can about the people you are working with - and if anyone takes offense that you want to check their claims and refuses, expecting you to just trust them - walk away.
  6. langbarb

    langbarb New Member

    thanks JM for you reply. I can't agree more with what you say. the one opportunity you describe sounds similar to one of the three i have looked at, and surprise surprise they are those offering the best returns. the other two seem more plausible and serious. I would be very grateful if i could PM you and name these opportunities to you. You might be able to give me a straight forward answer. this is my 2nd post so i suppose i am not allowed to send a PM yet, in case you could send one to me and i could reply to that, i would be very grateful. Thanks,
  7. debzor

    debzor New Member

    Rule of thumb - if a deal looks too good to be true... (you know the rest).

    Why on earth would a Brazilian developer be looking to buy funds from abroad at a rate much higher than he can find here???? I know any number of Brazilian millionaires who would jump to lend money at these rates!

    And then the developer has to pay the agent's fees as well, so it simply does not make financial sense, does it?
  8. JMBroad

    JMBroad New Member

    You can't receive pm's either until you have 5 posts I'm afraid - even from a moderator so I'm afraid that wouldn't work either
  9. JMBroad

    JMBroad New Member

    It is possible - say for example the developer doesn't have access to those Brazilian millionaires but already has contacts and a proven track record with to overseas investors.

    And funnily enough, that's the major hurdle we are coming up against at the moment - people applying the rule of thumb to investments which look too good to be true... even if they are true. Considering the state of most economies at the moment - even a bad investment in Brazil can offer much better returns than would be believable at home. It all depends on what we are comparing the returns to - the current European reality of achievable returns or the current Brazilian reality of achievable returns.
  10. langbarb

    langbarb New Member

    again agree with JM. the "too good to be true" argument does not make sense to me. You can get 11% return or so by investing in Brazilian government bonds, so if I was a rich Brazilian i would want at least 15% but more likely 20% to give my money to a developer (nothing against developers, but shouldn't I ask for another 50% yield to cover the extra credit risk i would be taking on board?). In the UK where I live, you'd get approx a 10% spread for lending to developers over short term UK treasury bonds..

    Again, if anybody with local market knowledge (Natal) is kind enough to be willing to have a look at the investment opps I have seen, could he/she please send me a PM? thank you ,
  11. langbarb

    langbarb New Member

    Sorry JM just seen yr post re. PMs... at least hopefully this is a further step toward he 5 posts...
  12. debzor

    debzor New Member

    You know your business better than I do, but can you offer 35% returns per year for 2 years? Hence my comment - if it looks too good to be true, it probably is.
  13. JMBroad

    JMBroad New Member

    Yes, often quite a lot more than that even but as a Joint Venture - aka an investment funds finances the build in exchange for a share of profits (keeping in mind that dividends are tax free in Brazil). We tried lots of different ways to involve the individual investor (aka selling one unit and then helping them sell on to the local market and because of purchasing costs, sales costs and tax it simply wasn't viable for the investor on MCMV developments).
  14. JMBroad

    JMBroad New Member

    1st option: Just from what you've said I can see a multitude of warning signs however perhaps the most worrying is the maths (both regarding the profit and the timings): After you buy a plot of land, it can take more than 12 months just to get the licenses and start construction so for someone to offer a 12 month return before they have even bought the land would worry me. But even if there is a logical explanation there - there are several other concerns - I know of all well known developers in Natal and I don't know of anyone who would even consider getting hundreds of "gringo" investors to finance a development - "gringos" are normally considered "problem investors" as they ask a lot of questions, normally get lawyers involved and complain a lot more than the locals.

    2nd option: Not much information there to go on. If they own the land and have all the licenses in place and are ready to start construction and there are enough units being built - it might be possible. Check who the developers are and what they have done (and delivered) in Brazil before this one. I think you'll find you are talking to an agent not the developer - check what price you are paying and how much they will sell for on completion and make sure the maths work.

    3rd option: Sounds a lot more plausible with regards to returns and timings. So plausible that as Rob says - the returns sound a bit on the low side. Having said this - it may well be a lot more than you would expect to get in the UK at the moment so "why offer more if they are content with less" - in the end everyone wins.

    Mainly for reputable developers to work with individual investors buying a couple of units there are several inherent risks and concerns that normally makes it not worth the hassle: The first is that you have hundreds of investors who want updating on a regular basis (and as mentioned, local buyers are normally a lot less trouble) and the second is that you have hundreds of potential investors who can default on their payments, leaving the construction in jeopardy. Most developers wouldn't take that risk if they can do it on their own - which most can (pretty much any well known developer can just get the financing from the "Caixa Económica Federal - CEF" at a lot less than 35% per year).

    The upside for developers is that individual investors putting 25k into a development will normally do less legal checks and sign less strict contracts and are less likely to sue if something goes wrong than someone who is investing 500k. Of course this only interests those who either hasn't got the experience and track record to work with large investors or the CEF and those who aren't worried about their reputation on the market because they only plan to do this one development.

    I agree with Rob - check the first two very thoroughly with regards to Due Diligence. Get your own independent lawyers to check the details and do your own checks - what have the developers built before? Do they have websites showing their delivered developments? One of the first basic checks you can do is ask for their CNPJ number and then reference that with the "Receita Federal" web page to get some basic details about their company.
  15. debzor

    debzor New Member

    OK - thanks for the explanation, I understand now. I was looking at it from the point of view of a simple investment, when the developer and then the investor would need to make profit.

    What you are saying is that these returns are possible if the investor and developer are in partnership as a joint venture, thus sharing all profits?

    Typically developers here seek to make at least 30%, and it does not work if they then have to make the same on top for the investors. But as a shared profit scheme, the maths works!
  16. JMBroad

    JMBroad New Member

    Exactly which makes me worried about option 1 and 2 which langbarb has been offered - 3 might work as it would be a profit sharing scheme.
  17. JMBroad

    JMBroad New Member

    If it is that one then unfortunately it probably won't work.
  18. lagarto

    lagarto New Member

    MDMY Holding Inc. S/A - MCMV

    100% MCMV in the states of Ceara and Piaui in the Northeast. 8000 units in process.

    Great success for MDMY which has "Gericada" status with the Caixa Economica Federal.

    No sales required in the 0-3 category.
  19. lagarto

    lagarto New Member

    MDMY Holding Inc. S/A - MCMV PAC1 and PAC2

    What have you not seen Bob. Our company has history going back to 1992 and is Gericada status which is only achievable with high monthly turnover and a 100% clean record within Caixa ( the bank ).
    We currently have over 340 million allocated for 8000 plus units across two states...all of which are in process and at different stages. All with government terms of adhesion.
    My question to you Bob is this: You have a well established company in Natal which is another state .. and I am working in category 0-3 which is a non sales environment .. so why have you made such a comment ? We are not competition and you are not Gericada status with caixa...
  20. lagarto

    lagarto New Member

    Investment opportunity MDMY COM BR

    Please answer my question first....because "according to your knowledge we have done very little" Please refrain from making comments until you actually KNOW. We have completed nearly 3800 in Piaui in a joint venture 0-3. We are in process of starting the next stage which only commences in Feb 2011 PAC2, approvals and project already approved ok.
    There is a video on Youtube with me flying my helicopter over the project for all to see.
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