During this time, rental rates in the hottest beach spot in Uruguay, Punta del Este, are exponentially higher than during the rest of the year. You can pay US$10,000 for a month to rent an apartment on the water in Punta del Este in January that you could rent for US$1,000 a month or less in April. It's a simple case of supply and demand...and the tourism demand for beach rentals in season is growing.
Tourism for Punta del Este increased 10.4% from 2006 to 2010 (about 2% a year compounded). That's not a huge figure, but you have to remember the high tourism rate for that area already in 2006, as well as the global economic issues (and those of Argentina, Uruguay's biggest source of tourists). In that context, it's decent growth.
However, just down the beach, about 30 minutes closer to Montevideo, lies Piriapolis. Piriapolis is relatively small compared with Punta del Este, but it has many of the same amenities, including nice beaches and a marina. During that 2006 to 2010 period, tourism in this localized region increased 78.6%. Even given a much lower starting figure, that increase is huge. And it indicates that, increasingly, people are looking for less expensive options to Punta del Este.
That's the market that a developer friend and colleague, David James, is looking to tap with his recently launched "Ultimate Bungalows." David has put together a rental product to allow investors to get in at a low capital investment while creating supply to feed into the growing tourism trend in this part of this country. And he's doing it all within his high-end gated community, Sugar Loaf Ocean Club & Spa.
Sugar Loaf has seven completed houses with others under construction, but these houses are bigger than many short-term renters are looking for. The bungalows are designed to be modular, meaning they can be rented out individually or as a group if a family needs several rooms together. And, thanks to the modular design, investors have a chance to buy a rental unit for as little as US$99,000.
In spite of the increased tourism figures, David has worked with relatively conservative numbers to project the net yields for his new bungalows. His projections are for 12.4% per year (after Uruguayan taxes) on the purchase price and 11.15% per year once you factor in an US$8,000 furniture package and the US$3,300 closing costs. That's a strong number considering, first, that the nightly rates being used for the projections are 10% to 20% lower than rates currently charged by local hotels and, second, that the projection for annual occupancy rates is only 50% (this takes into account the super low season along with the close to 100% occupancy that is reasonable to expect in the high season).
The structure and management of the rental units works like a condo-hotel unit. Your unit will be rented out with everyone else's. Direct costs are deducted, the management company takes a fee, and you get paid the balance once Uruguayan taxes have been paid. The split of the gross profit (before taxes) is 75/25, with you as the owner getting 75%. That split is the most generous you're likely to find in the condo-hotel industry.
David launched the new bungalows to his house list a few weeks ago and so far has sold 10 out of the 32 initial units he plans. The launch has worked so well that he's already planning a price increase Jan. 1, 2012. This doesn't give the would-be investor much time to make a decision, so David has offered to take a refundable deposit to lock in the current price while giving you 30 days to complete your due diligence.
Earlier this week, I detailed for you an ideally diversified global property investment portfolio. On that list of What The Well Diversified Global Property Investor Should Own Now, I included a rental in a resort location.
This new offering on Uruguay's coast would qualify nicely.
For more information, get in touch here.
Lief Simon
Editor's Note: Lief Simon left the States at the early age of 24 and headed, first, to Chad (with the oil drilling company he was working for at the time). In the near two decades since, Lief has lived and worked in 7 countries and traveled to 65.
All along the way, Lief has been actively investing and doing business. He has launched and managed business ventures in 10 countries, including local businesses, web-based businesses, and international franchises.
Real estate, though, has been Lief's primary focus. He has managed multi-million-dollar developments, multi-million-dollar property portfolios, and more than two dozen rental properties and has bought and sold real estate in 18 countries.
As Lief explains:
"I've made a considerable amount of money. And I've lost money, too. But I've learned from every experience, and, at this point, nearly two decades into my global investing career, I have more of a track record at this than any other private investor you're likely to meet.
"Real estate and business have been my focus, because these are assets you can control yourself. And, as important to me, if managed successfully, these are assets that can produce cash...ongoing yields in addition to any appreciation over time..."
Lief currently calls Panama City home but is on the road at least 50% of the time exploring new opportunities and new options.
Over the past three-and-a-half years, we've shared some of Lief's discoveries and recommendations in these daily dispatches. Now, though, we recognize that what Lief has been doing all these years is special and valuable. Something that only a handful of others have had the opportunity to figure out. Given the direction the world continues to head, the need for this kind of information, guidance, and expertise is much greater than it's ever been before.
That's why we're launching The Simon Letter.
The global investing, asset-protection, and tax-planning information in Lief's Simon Letter will be straight-up. Those who know Lief know that he doesn't mince words or waste time. He likes to take a position, take his profits, and move on.
In his new Simon Letter, Lief will give readers the intelligence and the judgment you need to make your own determinations. His aim is to help you take control of your life and your future, current global uncertainties notwithstanding.
"You're a grown-up," Lief says. "You'll decide what's right for you. My objective is to do everything I can to make sure you have the real-time, real-world information and intelligence you need to make the best decisions possible for yourself, your assets, and your family."
More soon.Continue Reading:
