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Investing in Brazil

Discussion in 'Brazil Property' started by PAUL-brasil, Sep 30, 2007.

  1. PAUL-brasil

    PAUL-brasil New Member

    Ola all,

    I m a new member on here and I am very pleased that i have found all of you who share my great interest in Brazil real estate. This being my first post on here and hopefully the first of many and hope I can learn more on here and also hope to add good info and interesting points of views as i have alot of thoughts on the issue.

    A little about myself, I am English, 29 years old, work as a Building Services Engineer in UK, have visited North East Brazil 4 times after catch the brazil property bug over the last 2 years (the 5th is due in early November) and have bought a 15 year old 3bed villa in Tabuba 18 months ago (Tabuba is the small beach town just right next to Cumbuco to the south and 20mins north of Fortaleza), I have had some difficult experiences and but also some good with my real estate dealings but have learn alot through it i suppose. I have also recently completed the reburbishments on the villa (details will come later as i will later try start a new topic about resales). Also I am currently looking for a cheap 2nd investment in Brazil and do alot of 'reshearching' on the new developments, areas, rentals and resales etc. I am also looking into creating a investment business as part of my 2nd investment for certain advanages like the visa for the option to use it and tax cuts?

    A couple of things to add while its my head, Golfingworld I totally agree with you that i think a lot of new developments are over priced and that there is not a great deal in rentals at the moment if you do it the traditional way that is, hence why i am more into investing doing it a little more raw, but that aside i also have alot of positives about them.

    Did someone mention Banana residence? is that the one where there is 80 villas between 4 blocks inbetween the 2 Lagoons? I was at the Banana Lagoon just in July, the area is fantastic and was actually speed jetting around it but couldnt see where that is being developed although i didnt look that hard. I have seen the plans for the villas though and a couple of things did put me off im affraid.

    Anyways i hope to speak more with you s all soon

    Paul
     
    Last edited: Oct 26, 2007
  2. Golfingworld

    Golfingworld New Member

    Please tell us more about your reburbishments I am interested.
     
  3. PeixeGato

    PeixeGato New Member

    Paul, please explain. What do you mean by "traditional way" and "a little more raw"?

    Thanks for your input. Its always great to hear from people who have already taken the leap!

    Greg
     
  4. PAUL-brasil

    PAUL-brasil New Member

    Good question, what i was meaning by that is it appears to me so far (please someone correct me if im wrong as i certainly dont fancy myself as an expert yet) that in Brazil Gingo s general buy an offplan or newly built and agree a rental agreement with the developer or agent at on say 8% and call the 8% a 'return' this 8% is what before you deduct the income tax at 16% then the high agents rental commission (normally 30%) after the tax all on your 8%, then of cause deduct your electric bills for your tourist tennants and your communal fees. Then its transfered to you account in whereever and loose even more on the usual high international bank charges. After all does not leave you with much.
    Without going into examples with figures im sure you get the general picture.

    Another for example would be to advertise it your self in brazil on popular rental websites, charges are (R$70 per month) but they are effective if you have property where brazilians want to go for holidays or would want to live long term for work for example. people use the website to contact you asking availability or negoiate a cheaper deal for them selfs. For example you can buy a resale 1 bed apartment on the prime biera mar fortaleza for R$85000 and charge the going rate there at R$100 a night, on BELOW average i think you get about 50% usage from tennant making your self about say R$18000 year, thats 21% yield, then minus a communal fee, common is R$400 month minus your R$70 minus say R$100 for electric a month leaving you with around R$11100 a year which then still gives over 13% at worst after i deducted bills.

    Now 2 choices buy your property through your own company so your rentals can go through straight to your bank account in Brazil before your tennants use it, then you inform the receiption at your apart/flat that it is reserved on the dates etc to give them permission to hand over the keys. then you also get taxed lower and rebated against your outgoings. Also if you cant speak the portuguese it does not matter as you are communicating through email and there is plenty of tools to use to translate your messages, plus alot the Brazilians who can afford the prime locations are well educated and can speak english quite well. The other choice is to not to use a company but also not pay the tax at all instead you find someone you can trust hopefully from our own country who lives there(which is of cause difficult on your first few trips to a new country to you) who can collect the money for you and save it then collect in cash or transfer it for you from there own account. This is widely used and proffesional people do this for a 20% cut. If they try rob you then they loose your business and recommendations and you keep account as all bookings are done through yourself.

    Sometimes I think people forget alot about this huge internal market in a country with 170M people in a growing econemy while there is already double the amount of millionaires than in Britain. Its certainly not a third world country with simply just a emerging market.

    Hope this all made sense as i am writing this while very tired

    Speak later
     
    Last edited: Oct 1, 2007
  5. PeixeGato

    PeixeGato New Member

    WOW! Thanks for making this much clearer. So how do the Brazilians pay you for their stay? Do you have a bank account where they wire the money into?

    Also, would that set-up work if you decided to advertise your property on a website that is geared toward international travelers? Coudl you set up your account in your home country and have them pay you before they arrive in Brazil, thereby cutting the Brazilian bank system out of the loop completely, or would this raise the red flag to officials in brazil? I guess my overall question is making the unit available to the international market as well as the in-country market.

    I had figured that you were paying a premium for the off plan stuff, even though you are buying it cheaper than it would cost after completion (so they claim). After all, you are paying for new construction, the convenience of a management company already set up, the community feel with the club house and all, etc, etc.

    Have you looked into buying desirable beach-front land with the hopes of either developing it or selling it to a developer?

    Thanks again for your insight!

    Greg
     
  6. Golfingworld

    Golfingworld New Member

    Greg, the best way to find out is to go onto a website and try and rent a holiday home in Brazil and see what responses you get. There are a number of sites..just put a search in for rentals in natal for example. Then you can talk to the people and see how they want to do it...there are a few Italians doing it in Natal. I spoke at length to one and learned a lot. The off plan takes a lot of hassle away (allegedly) but what you have to consider is whether the premium price and all the costs associated with the rentals make it worth it. Frankly, if you have €100k to spare it is no an issue, but if you need the rentals to pay back the capital you have advanced I think it is risky territory in the short term. I did some sums and worked it out that all my alleged rental income would beswallowed up by charges. Likewise, I don't think there will be a stampede to "out of town developments" as many of them are positioned where there is nothing for the prospective tourist to do. Consequently, there will need to be signigficant capital appreciation to make it worthwhile as I don't beleive the rental market is there until flights are cheaper and more available and rental prices equal all inclusive hotel deals like Breezes etc. Ihave only found one place so far that might have all these elements working an that is north of Salvador in a place called Imbassai...here you have amenities nearby and developed but low priced starter developments..but you still have the flight problem to overcome.
     
  7. PeixeGato

    PeixeGato New Member

    Golf,

    Thanks. I'll do just that. When you spoke to them, were you up front in telling them you were an investor looking to learn how things are done, or did you act as a potential renter the whole way through?

    what about everyone else? Are you guys buying primarily as a rental investment or as a second home that you will rent out from time to time?

    Greg
     
  8. Golfingworld

    Golfingworld New Member

    I spoke to them as a genuine renter as I don't own there yet, so it was a joint attempt to find somewhere for December and also to learn. The basic problem is that rental values, even holiday lets, are very low compared to Europe or USA. I have even considered not bothering to buy as you can rent so cheaply, especially if you take a long let or avoid December to February. If you move out of the obvious tourist traps it is very very cheap. Again, this why I think off plan is false economics, as they are going to try and charge prices nearer to Europe, otherwise the sums don't seem to add up. But, from the Uk and probably from other European countries a couple can do 2 weeks "all inclusive" with flight/2 weeks for something like €1500 each. If you can sit and eat and drink free for 2 weeks with full amenities, why would you rent from me for 25% more and organise your own flight/transport and buy your own rum?

    I also think this is why the UK operator Thomson has removed the flight only option to Natal from their website. There is no question that interest and demand for Brazil is being stoked up, but there is virtually no capacity into the area to meet this. Without boring you, only Thomson from the UK go to Brazil direct, BA will route you via Rio and Virgin don't go. You cannot connect via USA easily. That leaves one flight from Amsterdam, one from Brussels, a couple of charters from Spain and TAP who want £900 for December. But, if you buy the whole (hotel) package from Thomson the flight related element drops significantly. You can see where I am going with this and that is until there is a huge increase in flight capacity, personal rentals won't work. Why will there not be a quick change in capacity, because it is the last bastion of airline cartels....you can get to Oz £250 cheaper than to Brazil in December and it is about 12 hours longer to fly there! Charter operators will use the increased interest to fill their hotels not your condo!
     
    Last edited: Oct 1, 2007
  9. PAUL-brasil

    PAUL-brasil New Member

    Hi first timer,

    Going from memory as i look at these plans about 5month ago and have thrown the plans away now, The building is much smaller than stated, cant remember the dimension now but this trick is getting very common now in the ceara, (not too sure about this happening too much in Grande de Norde yet) let me explain by example the builder will build up a house at say 70M2 inside build, he will the maybe put a big roof overhanging the brick work so legally the speaking this built adds say another 20M2, then there a big patio for the car to sit on adding another 30M2 'to the living build' thens maybe s there also a another patio (a few paving slaps) added at the back of the outside house to another 15M2. Then before you know it we have advertised a huge built house at a generous 135M2 to give the impression to a european 2.4 family that theres loads of room for them all inside the house.

    Also i remember that the villa s on plan was designed for full air flow with air bricks and open air gaps, that good and is of cause popular in hot areas, but what is crazy is that they put airconditioning included on the plans, you have one of these methods but NOT both!! You can only air con a closed space not an open space is impossible. So if a designer can make a obvious mistake like that then makes me think what else!

    Also i personally, if i remember correctly, didnt like the general layout of the houses. one bedroom is open space with no privacy and also had to walk through one bedroom to get to another, So When coming to sell it say in 6years and buyers see in the real view i think alot of people would be put of by the layout.

    That aside the area is amazin, with lots of expensive classy existing villas nicely spead far apart along the lagoon so great area.

    Hope that helps and that we area talking about the same development
     
  10. ferriej

    ferriej New Member

    Paul_brasil

    thanks for your reply, yes we are talking about the same development.
    i will need to look at the size in more detail than i have.

    still think this will prove a good investment. i got in at first release(75,000euro) which i feel is good value

    reassuring to hear you compliment the area which contradicts some previous posters who put the area down with bad roads, close to favellas, crime etc.

    would really like to get over there myself but its getting time to do so.
    for the timebeing i'll need to rely on feedback from the forums, websites, photos etc
     
  11. PAUL-brasil

    PAUL-brasil New Member


    Yes i still think you have a decent investment, they are no favellas around there for sure, the main road up the north beach from Fortaleza is fine, most of smallroads by side streets are bad but that everywhere in Brazil and infact most of the world. I also think for investment is decent because you are also hitting the huge internal market when you come to try rent/sell rather than just relying on foreign tourism. Any other tips then please just ask me!
    Good luck
     
  12. nickohorny

    nickohorny New Member

    Paul-brasil

    I have sent you a pm, be very greatful if you could read it for me and let me knwo your thoughts.

    Kind regards
    Nick
     
  13. PAUL-brasil

    PAUL-brasil New Member

    Hi Greg,

    That method is an prime example, little more hassle but lots more profit on income and more importantly income straight away instead of waiting 2year etc. I used this example which is very common to help open a few minds and put a dent in the offplan sales spin and propaganda which i feel is being pushed a little too far. Dont worry readers as much as i admire and agree alot of which Golf writes rest a sure that i am not Golf the 2nd as the difference is i so believe in investment Brazil as a whole, i just want some people to be more flexible in there thoughts about it all.

    At the moment i own a villa which i hope you have already read about, not a appartment on Beira Mar (altough that is my next aim!) I dont use that system you are asking about yet. In fact i have only rented my villa out on 3 occasions due to only just doing my refurbs because i only got the fund s to do it only a few months ago and because i had some after sales problems with the dam estate agent i used (estates who dont specialise in rentals and only interested in sales) all sorted now though and learned more lessons. The rentals i have had someone who lives in the area collected for me and gave me the money in cash in July when i was last there, infact my my friend got me those rentals shortly before i even did the refurbs at 20% cut, I will be using a internal website shortly and as you wisely stated (you hit the nail right on the head there) be advertising the tourist market too. Tourist would pay direct to my UK account (no tax someone is only owing me some money) because i have a advanage with some contacts in the area and as i visit often i will let my contact collect for me for the 20% and save it till i have my Brazilian account sorted. -Brazilians would not like sending money abroad because international banking in brazil is higher charge than UK.

    Now my villa was aimed at a big capital gain with rental income as a nice little bonus for holiday money, my next move i plan on Beira Mar 1 bed, Iam in the process of organising a investment business account then using the $50K to buy the apartment.
    Advantages is that Brazilian rentals pay into the account, i dont need topay my contact the 20% and i have the use of a visa as a options (as i think options are great as you never no what the future holds and also i am considering mybe working over there in the short future).

    Disadvantage is have to pay the tax which im guessing would be too awkward to dodge though a business acc. but also which the tax can be very much reduced but i dont have enough of those facts yet as still working on that one.

    Brazilians if they earn extra money into their personal acc they would laugh at the possibility of paying tax on it, i asked about it once in brazil and got looked and talked at as if i was crazy.

    Hope that helps

    Paul
     
  14. PeixeGato

    PeixeGato New Member

    OK, I think I got it Paul, but let me clarify...

    Currently, you are renting to Brazilian citizens who pay your local contact in cash when they arrive at the property for their vacation stay. Then, when you visit the property, the contact gives you all of the cash he has collected since your last visit, less his 20% cut for his work. What do you do with this money while waiting for your Brazilian bank account to be set up?

    For non-Brasilian residents, you have them transmit payment directly to your UK account when they make a reservation, correct? That sounds simple enough if the tourists are from the UK. What do you do if you get someone from outside of the UK who wants to rent it out? Do you know if businesses like PayPal can handle international transactions? If so, it sounds like that would be a convenient way of handling rent payment.

    Then, once you set up your brasilian bank account, you will have brasilian citizens pay directly to that account (can you explain how this would work logistically?). Will you still have non-brasilians pay to your UK account or will they pay into your account in Brasil?

    Also, how would you suggest going about finding an agent who specializes in investment properties? I guess it would be the same process as at home....you ask around and ask the agent questions about investing. While I love the idea of buying fixers, rehabbing them, furnishing them, and then renting them out (great way to create capital gains), I am a bit wary of doing so from afar as I would not be able to be there to oversee the rehab process. I'm guessing your local contact handled this for you, no?

    I am also curious about buying land for development, but have no idea how to look into the legal side of development (i.e. finding out how buildable a plot of land really is, who owns the neighboring plots, getting permits and approval to develop the land, etc). I'm guessing a good local real estate lawyer can assist with that. Again, the issue is finding a good one. I have also considered buying land and holding it to resell to larger developers, but that is a very risky strategy as waiting for a developer to be interested in your specific parcel of land could be like waiting for your numbers to be called in the lottery.

    I guess I have a lot to think through (as well as a LOT of on-the-ground investigating to do), but this type of dialogue is very helpful and is why I love this site. So many issues have been mentioned that I never even thought about (and I'm guessing a lot of people who have bought off-plan haven't thought about either).

    Thanks again and please keep us posted! Feel free to PM me if you feel the discussion is getting too detailed for the general board.

    Greg

    Oh, one more question...do you speak portuguese or use translators?
     
  15. Golfingworld

    Golfingworld New Member

    I think the easy way is to find a local administrator (known as Gestoria in Spain, not sure in Brazil) to take your money and make your contracts etc. Plus he will speak the language.
     
  16. robh

    robh Administrator Staff Member Premium Member

    Greg,

    Land is pretty difficult to find out there without the help of an agent as a lot of it isn't marked or even obviously listed for sale.

    Have a look at the listings on our site, we have two people out there scouting around for us to find them and they find most of it through their local contacts.

    There are some fairly obvious rules to follow when looking at land to see what your chances are of getting a license for the project you want. They are mostly to do with environmental factors like how close to the beach, rivers, mangroves, lakes, atlantic forest and of course wildlife. Local planning laws are very strict in some places and not in others. The fun bit is that in Natal you require 7 licenses all up before you can start building.

    If you are serious about buying a large plot of land and want to go out to Natal then I can get one of our guys out there show you around and also introduce you to a lawyer we deal with a lot who is very good at getting all the required licenses.

    Rob
     
  17. PeixeGato

    PeixeGato New Member

    Hey Rob,

    I am serious, but am not yet ready to pull any triggers. I have to sell a business I have here in the States before I'll have any cash to invest with. But I'll be on these message boards in the mean time, so I won't lose your information.

    Greg
     
  18. PAUL-brasil

    PAUL-brasil New Member

    Hi Greg

    I will answer your other Qs a little latter

    I dont know enough info on buying land but from what i can gather from learning a little about it is that its too much hassle for me (and that coming from ME :confused:) and because i think they can be more risks involved if you get something wrong. But also i think if you get it all right and also have the money to build on to it they can be great gains especially if you can over price it to foreigners ha ha. I actuall now know someone who now lives in Cumbuco who has successfully invested in land in a good area called Taiba but is now having lots of trouble get the building done but hopefully he ll get things sorted.

    Regards, Paul
     
  19. robh

    robh Administrator Staff Member Premium Member

    Look forward to it..
     
  20. robh

    robh Administrator Staff Member Premium Member


    Buying land and developing it is just like doing it anywhere else, you need to know your stuff of course, but more important is knowing the people who know how to get things done.

    Rob.
     
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