Is This A Good Time To Buy A Rental Property In Brazil?

“Kathleen The New York Times recently reported that Brazil is on the brink of a huge public pension crisis, due to over-spending and an aging population.

“What’s your current position on Brazil?”

–Lynn M., Ireland

Latin America Correspondent Lee Harrison responds:

Brazil is indeed experiencing an emerging crisis in its public pension system. Many people are retiring in their 40s and 50s (the average retirement age is 54), while fewer new workers are joining the workforce to pay for those retirees.

Nonetheless, Brazil has a lot going for the second homeowner; warm weather, low cost of living, amazing food, an unparalleled friendly culture, and thousands of miles of beautiful beaches.

And as a U.S. dollar-holder, you can buy now at a huge currency discount. Brazil is the only place I know of that’s discounted more than Colombia. The dollar’s buying power has gained over 250% since I sold my house in 2010.

But I won’t make any predictions about near-term capital gains. The Brazilian real could get still-weaker than its current level… and economic hard times could mean that prices in the local currency go down in the second/vacation home market.

For income properties, the only thing that could tempt me would be a property that I bought in reals but that could be rented in dollars, as your dollar-based income would buy lots of local currency.

The bottom line is that I think it’s a good time to buy for the lifestyle or to own a second home or vacation home… but don’t expect a near-term recovery to provide you with a capital gain.

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