Seeking Advice: Buy/Invest in Rio de Janeiro

[maclarke]

Thank you for your reply John.

To answer your questions:
*Do you speak Portuguese fluently?
*Have you made purchases in Brazil before and are familiar with the process?
*Have you worked with the agent/developer who you are considering buying from before on other deals and are happy with the service provided to you on those deals?

The answer to these are no- but i have made other contacts in Brazil that will assist me with making a well thought out final decision (as well as joining this forum to meet people who are in a good position as they have the experience).

A little about myself. I am a project engineer who has recently been in and out of Brazil for several months. Working for an oil company, I can see and have heard about the vast oil reserves in the country along with the companies that are awaiting licenses to work for the purpose of extraction. As the price of oil has slummed and companys have begun pulling their expat employees out of the country, I know that this is only a temporary measure.

Oil companies have setup in Rio and have limited themselves to renting properties in certain areas within the city close to offices. Some of my colleagues were on long term contracts within the country and were living in rented accomodation- hence the reason why I wanted to focus on letting to businesses (hopefully working with one at a time). With what I saw with my company, I can only believe that others such Shell and Chevron have done similar with their staff. So in essence this seems to be a good option - I won't totally rule out renting to locals if it's in my best interest.

My decision to invest in Brazil rather than in the UK is due to the fact that I am still relatively young. I have accumilated savings to invest within the UK (particulary London) focused on the market when a 10% deposit was required. Now however, things have changed due to the current climate and this is simply not enough to buy. Brazil to me is screaming investment opportunity.

On a personal note. I love Brazil. I can definately see myself moving there at some point and have requested a transfer on several occasions - now not being the best of times for my company. I am learning Portuguese (I admit no where near enough to survive on).

I not only see this an investment, but as my first grounding.

Do you have any advice that you can give me in my pursuit of investing in Rio? And as you mentioned early, do you know any place for legal advice which you might have used in the past?

Your input is priceless and would be well received.

Kindest Regards

Matthew

 

[JMBroad]

Hi Matthew

Given your current situation I'd definately suggest contacting some law firms to help check the legalities of your purchase - regarding which law firm, there are a couple of representatitves who post here on the forums which could probably help you as well as a thread where several of the forum users including myself offered some suggestions.

http://www.propertyforum.com/forum/brazil-property/10614-brazil-property-solicitors-law-firms-ideally-uk-office.html

Regarding your investment strategy - it makes a lot more sense to me now - especially if you have the connections to those companies who will be looking to rent accomodation for their staff. Oil companies are likely to increase activities in Brazil before many of the other multinationals given the huge jump Brazil is doing in that field.

Regarding investing in Brazil or the UK as far as I see it there is no choice at this point in time - it makes sense to invest in Brazil but doesn't make sense to invest in the UK so definately agree with you there.

Overall looks like you've got a good plan - Good luck and let us know how it goes!

 

[maclarke]

Thank you for your support.

The ball is starting to roll now. I have arrangd to meet with the International Property Law Centre LLP to discuss my case for buying in Rio.

Also, I went to see HSBC about opening anccount that I could operate for the purpose of transferring money to brazil at a minimum cost.

I've recently received quotes from an estate agent in Brazil but now i'm wondering who the best people to obtain a mortgage from the UK would be...any ideas?

I suppose the best thing for me to do now is envisage all of the pit falls and plan for any bad occurances

cheers

Matthew

 

[robh]

Thank you for your support.

The ball is starting to roll now. I have arrangd to meet with the International Property Law Centre LLP to discuss my case for buying in Rio.

Also, I went to see HSBC about opening anccount that I could operate for the purpose of transferring money to brazil at a minimum cost.

I've recently received quotes from an estate agent in Brazil but now i'm wondering who the best people to obtain a mortgage from the UK would be...any ideas?

I suppose the best thing for me to do now is envisage all of the pit falls and plan for any bad occurances

cheers

Matthew

Hi Matthew,

Do you have a visa to live in Brazil? If not then HSBC can probably do nothing for you. You can talk to Moneycorp about transferring money at low cost and they can also open a bank account for you.

If you want a mortgage in the UK then you will need to release equity from your home or other assets in the UK (or EU) as UK banks will not accept Brazilian property as collateral.

Hope that helps,
Rob.

 

[maclarke]

Thank you rob,

I have a work visa which has recently expired. This is the next topic that I am researching - Mortgages.

Does Brazil provide mortgages to foreigners? I am researching companies in the UK that might provide this. However, I do not own a property, just cash savings. Is this a problem?

cheers

Matthew

 

[robh]

Thank you rob,

I have a work visa which has recently expired. This is the next topic that I am researching - Mortgages.

Does Brazil provide mortgages to foreigners? I am researching companies in the UK that might provide this. However, I do not own a property, just cash savings. Is this a problem?

cheers

Matthew

Brazilian banks do not really provide mortgages to foreigners at the moment, and if they do offer you a mortgage the interest rate would be very high.

If you can buy the property for cash then do so, also you might want to look at an offplan so that payments are spread over a couple of years.

Regards,
Rob.

 

[maclarke]

I very briefly heard that when Brazil eventually offers these mortgages to foreigners, the interest rates would be quite favourable.

Is this likely to happen anytime soon?

Matthew

 

[robh]

I very briefly heard that when Brazil eventually offers these mortgages to foreigners, the interest rates would be quite favourable.

Is this likely to happen anytime soon?

Matthew

I am hoping it will happen soon, and it looks like it will happen eventually, but I can't see them being offered for at least 2 years. I tried putting together a mortgage product last year, but the credit crunch finished that venture very quickly.

Regards,
Rob.

 

[maclarke]

Wow...this is my first obstacle. So there must be an alternative means for investing in Brazil. I dont suppose you know if there is an arrangement from a UK bank at all that would provide a mortgage?

I've just checked out the UV-10 website. You guys seem to have some experience of this

Matthew

 

[robh]

Wow...this is my first obstacle. So there must be an alternative means for investing in Brazil. I dont suppose you know if there is an arrangement from a UK bank at all that would provide a mortgage?

I've just checked out the UV-10 website. You guys seem to have some experience of this

Matthew

What is your budget?

 

[Dotty]

Unfortunately,most unlikely.

Might be an idea to borrow money from the UK at a lower interest rate and then purchase a pre -launched project where you can pay over a short or long period of time.The quicker you pay the better,the longer you pay the more expensive it becomes .Then you need to consider the exchange rate .Visit as many companies,projects you can in Brasil and do not purchase on line,no matter what the gloss looks like.

I very briefly heard that when Brazil eventually offers these mortgages to foreigners, the interest rates would be quite favourable.

Is this likely to happen anytime soon?

Matthew

 

[dhoskings]

Unfortunately,most unlikely.

How do u know it is unlikely Dootty? Do you know people in the mortgage industry?

 

[Dotty]

Probably because Brasil are still trying to sort out their own financial borrowing fiasco that it is finally sinking home to the local people that borrowing to buy in Brasil where interest rates are amongst the highest in the world is not the ideal and as they have such tough regulations on a foreigner even opening a bank acount here it is most unlikely that they will be throwing money at overseas investors to borrow. This is Brasil .

How do u know it is unlikely Dootty? Do you know people in the mortgage industry?

 

[dhoskings]

Probably because Brasil are still trying to sort out their own financial borrowing fiasco that it is finally sinking home to the local people that borrowing to buy in Brasil where interest rates are amongst the highest in the world is not the ideal and as they have such tough regulations on a foreigner even opening a bank acount here it is most unlikely that they will be throwing money at overseas investors to borrow. This is Brasil .

So really you just have no idea whether it will happen or not...

 

[JMBroad]

Probably because Brasil are still trying to sort out their own financial borrowing fiasco that it is finally sinking home to the local people that borrowing to buy in Brasil where interest rates are amongst the highest in the world is not the ideal and as they have such tough regulations on a foreigner even opening a bank acount here it is most unlikely that they will be throwing money at overseas investors to borrow. This is Brasil .

Dotty, the mortgage market in Brazil is a year old. It is also expanding at an incredible rate. Since December 2003 the amount loaned out by financial institutions for the purchase of residential property has increased on average 1% per month. Since around May 2007 it started increasing at double that rate - on average 2% per month until around May 2008 at which time it jumped to 3% per month.

As of January 2009 it's at R$ 78.165 million - an increase of almost 40% in one year. Let me say that again so it can sink in... The total amount of money in Brazil given out by financial institutions to finance housing has increased from January 2008 to January 2009 by 40%... (Detalhamento dos usos - aplicaçoes imobiliárias - financiamentos habitacionais - direcionamento de recursos SBPE)

So... I'd hardly say that "it is finally sinking home to the local people that borrowing to buy in Brasil (...) is not ideal"... Considering that until last year they couldn't borrow money at all, regardless of interest rates - it's not surprising that it's increasing this fast. Even growing at this rate it's a fraction of GDP - nowhere near the fiasco we saw in the US and UK with vast amounts of GDP tied up in mortgages (I read somewhere that mortgages in the UK represented 76% of GDP - not sure if that is right!?). In 2008 Brazil had the 10th (!?) largest economy in the world by GDP and one of the lowest mortgage % of GDP (only 4% of GDP).

I've not checked but I'm sure that If you take countries like Spain, Bulgaria, Turkey, Malaysia, Egypt, Panama, Thailand etc where there has been increased interest from overseas buyers in the past - I'm almost positive you'd find that mortgages were first only available to locals - but that eventually changed and mortgages became available to foreigners - which is what everyone is expecting to happen in Brazil.

 

[DGM42]

Mortagages are expensive in Brazil
Does anyone know the cost of these, set up costs, interst rate, how many years over.

Brazilian nationals can get mortgages over 10 years through there companies/government scheme that is how my fiancee paid hers off a couple of years ago and now owns her apartment outright. The interest was quite low. DOn't know if this is avilable to every Brazilian though

 

[JMBroad]

Mortgages are ridiculously expensive in Brazil however only if compared to the rest of the world and, as the mortgage market is in its infancy, it's to be expected.

However before the thirty year mortgage product was launched (end of 2007) the only way the local population in Brazil could finance their purchase (apart from being sponsored by their company which I hadn't heard of) was to accept developer finance which was very short (max ten years normally) and even higher interest rates - around 24% per year in some cases.

Currently it depends what your income is. For low and medium income Brazilian families, they can get government sponsorship when applying for a mortgage to purchase their first home and therefore can get some quite low interest rates.

On the 15th of October 2007, Santander started offering the thirty year mortgage for the first time - this was the longest period ever on offer from a bank.

For houses from R$ 40.000 the interest rate was 13.5%
For houses up to R$ 120.000 the interest rate was set at 9%
For houses from R$ 120.000 to R$ 350.000, the interest rate was 10.95% for the first ten years then 8.95% for the remainder
For houses over R$ 500.000 the interest rate was set at 14%

With Caixa Económica today;

For houses under R$ 100.000 Brazilian families can get up to 80% LTV and around 6% interest per year
For houses up to R$ 200.000 Brazilian families can get up to 70% LTV at around 10% interest per year

 

[DGM42]

Thats not as bad as I thought it might have been, still expensive compared to UK now.
But probably with the same chance to get a mortgage as they are so rare in the UK now.
I still remember the days in the UK when rates were 15% and I was paying something like over £700 per month on a £50,000 mortgage over 25 years.
Property prices are amazingly different in Brazil with an apartment in one block being 3 times the price than the adjacent block (the first one being a lot older apartment but similar in size) or is that just in BH. There doesn't seem to be any formula and course if it's a gringo asking the price suddenly rises even more.

 

[Dotty]

Are you looking to buy in Natal as there is a webpage that is really good and the prices are as quoted RNimoveis.com - Imóveis em Natal RN BRASIL.

Thats not as bad as I thought it might have been, still expensive compared to UK now.
But probably with the same chance to get a mortgage as they are so rare in the UK now.
I still remember the days in the UK when rates were 15% and I was paying something like over £700 per month on a £50,000 mortgage over 25 years.
Property prices are amazingly different in Brazil with an apartment in one block being 3 times the price than the adjacent block (the first one being a lot older apartment but similar in size) or is that just in BH. There doesn't seem to be any formula and course if it's a gringo asking the price suddenly rises even more.

 

[JMBroad]

Thats not as bad as I thought it might have been, still expensive compared to UK now.
But probably with the same chance to get a mortgage as they are so rare in the UK now.
I still remember the days in the UK when rates were 15% and I was paying something like over £700 per month on a £50,000 mortgage over 25 years.
Property prices are amazingly different in Brazil with an apartment in one block being 3 times the price than the adjacent block (the first one being a lot older apartment but similar in size) or is that just in BH. There doesn't seem to be any formula and course if it's a gringo asking the price suddenly rises even more.

It can happen - just means that the ones selling cheaper sell a lot faster and can turn around and invest in another development. The gringo thing we discussed on another thread - does happen but not because you are a gringo, it's because they associate gringos with wealthy people. If you are a Brazilian and you show up in a porsche the price will probably go even higher than a Gringo in a fiat.