• About Us
  • Contact Us
  • Privacy Policy
  • Terms
  • Unsubscribe
No Result
View All Result
Live and Invest Overseas
FREE REPORT
BEST PLACES TO RETIRE
*No spam: We will NEVER give your email address to anyone else.
  • HOME
  • COUNTRIES
    • Top Destinations
      • Portugal
      • Panama
      • Belize
      • France
      • Colombia
      • Dominican Republic
      • Thailand
      • Mexico
      • Spain
      • Argentina
    • Browse All Countries
    • Best For
      • Retire Overseas Index
      • Health Care
      • Cost of Living
      • Investing in Real Estate
      • Editor’s Picks For Retirement
      • Establishing Residency
      • Starting an Online Business
      • Single Women
      • Playing Golf
  • BUDGETS
    • Super Cheap ($)
      • Cuenca, Ecuador
      • Chiang Mai, Thailand
      • The Philippines
      • Las Tablas, Panama
      • Granada, Nicaragua
    • Cheap ($$)
      • Algarve, Portugal
      • Medellin, Colombia
      • Boquete, Panama
      • Carcassone, France
      • Buenos Aires, Argentina
    • Affordable ($$$)
      • Abruzzo, Italy
      • Barcelona, Spain
      • Las Terrenas, Dominican Republic
      • Puerto Vallarta, Mexico
      • Costa de Oro, Uruguay
    • Luxury On A Budget ($$$$)
      • Ambergris Caye, Belize
      • Paris, France
      • Panama City Beach Area
  • Real Estate
  • ARCHIVES
    • Living & Retiring Overseas
    • Raising A Family Abroad
    • Foreign Residency & Citizenship
    • Offshore Diversification
    • Our Latest On Coronavirus ⚠️
  • Making Money
    • International Real Estate
    • Banking
    • Employment
    • Investing
  • CONFERENCES
  • BOOKSTORE
Live and Invest Overseas
  • HOME
  • COUNTRIES
    • Top Destinations
      • Portugal
      • Panama
      • Belize
      • France
      • Colombia
      • Dominican Republic
      • Thailand
      • Mexico
      • Spain
      • Argentina
    • Browse All Countries
    • Best For
      • Retire Overseas Index
      • Health Care
      • Cost of Living
      • Investing in Real Estate
      • Editor’s Picks For Retirement
      • Establishing Residency
      • Starting an Online Business
      • Single Women
      • Playing Golf
  • BUDGETS
    • Super Cheap ($)
      • Cuenca, Ecuador
      • Chiang Mai, Thailand
      • The Philippines
      • Las Tablas, Panama
      • Granada, Nicaragua
    • Cheap ($$)
      • Algarve, Portugal
      • Medellin, Colombia
      • Boquete, Panama
      • Carcassone, France
      • Buenos Aires, Argentina
    • Affordable ($$$)
      • Abruzzo, Italy
      • Barcelona, Spain
      • Las Terrenas, Dominican Republic
      • Puerto Vallarta, Mexico
      • Costa de Oro, Uruguay
    • Luxury On A Budget ($$$$)
      • Ambergris Caye, Belize
      • Paris, France
      • Panama City Beach Area
  • Real Estate
  • ARCHIVES
    • Living & Retiring Overseas
    • Raising A Family Abroad
    • Foreign Residency & Citizenship
    • Offshore Diversification
    • Our Latest On Coronavirus ⚠️
  • Making Money
    • International Real Estate
    • Banking
    • Employment
    • Investing
  • CONFERENCES
  • BOOKSTORE
No Result
View All Result
Live and Invest Overseas
No Result
View All Result

Real Estate Investment In Brazil

Kathleen Peddicord by Kathleen Peddicord
Dec 05, 2013
in Real Estate
0
coastline with lush green mountains in Brazil
208
SHARES
3k
VIEWS
Share on FacebookShare on Twitter

The Secret To Making Money From Beachfront In Brazil

Brazil presents opportunity for both the investor and the second-home-in-the-sun buyer. However, purchasing property in Brazil can be tricky.

The buyer in Brazil has to navigate constant fluctuations of the currency exchange rate between the real and the U.S. dollar. In addition, Brazil imposes exchange controls, meaning you must be careful about how you bring money into the country or you could have trouble when the time comes to take it (and any associated profits) out.

I know investors who tell horror stories about their experiences trying to repatriate funds from Brazil, including one American who tried to enlist the U.S. embassy as an ally in his battle. FYI, the U.S. embassy can’t really help with this kind of thing. This is what your local attorney is for.

Meantime, it’s not uncommon in this country to find developers offering financing with a very low down payment. This presents a great and unique opportunity for leverage; it also creates its own set of risks.

I knew, a few years ago, of a well-publicized launch of a pre-construction project in Fortaleza, on Brazil’s northern coast. Promoters had secured a block of condos with exclusive rights to market them prior to the public launch. The developer agreed to extend a 20% discount to these early buyers and to provide developer financing with only 1% down. The condos were intended to serve the business traveler and tourist market as short-term rentals, with an eye to the anticipated demand created by the 2014 World Cup taking place in Fortaleza. The offer was well-received, and scores of investors participated.

When the official public launch was held for invited local real estate agents, the units were offered at a 5% discount, meaning the early buyers had bought for 15% less than the initial public price. As a result, some investors made good money. Some, though, saw only modest gains, some lost money, all things considered, and many are still holding their units. What’s the difference in the outcomes to date?

The terms of purchase. The cash buyers fared best. The U.S. dollar was relatively strong at the time of purchase (1.95 reais per U.S. dollar), then dropped over the following year, to 1.79 reais per U.S. dollar. Cash buyers who sold their units made 9% on the exchange rate alone, plus approximately 15% on the value of the property. For a buyer selling after one year, those two things compounded to mean a gross gain of more than 25%, before transaction costs.

The complicating factor was the developer financing, for a couple of reasons. First, as buyers taking advantage of the developer financing were paying over time, they were exposed to the dollar’s decline during the finance period. They had bought with a fixed monthly payment of 1,450 reais. Over the course of the following year, this payment increased from US$743 to US$810 per month in dollar terms.

In addition, making time payments anywhere in Brazil exposes you to something called INCC, a government-established inflation adjustment that allows builders to keep up with ongoing increases in the cost of materials and labor during any construction period. In the particular year following purchase in this case, INCC added a total of 5.91%.

Do the math and you understand the problem. The time-payment buyer was left with a total gain (in dollar terms) of just 9.3%, compared with more than 25% for the cash buyer, before subtracting transaction costs, travel expense for visits to the property, etc. Net gains after one year in these cases were modest, in some cases non-existent.

I think this is an important case study because it seems to fly in the face of traditional wisdom to do with how to make money investing in real estate. You make more money with leverage, right?

When buying overseas, as this example shows, this is not always the case, though it’s important to note that things could have turned out differently in our example. Had the dollar strengthened during the period in question, the cash buyer would have suffered, while the time-payment buyer would have watched as his payment went down and his unpaid balance shrunk, in dollar terms.

That’s buying pre-construction on time from a developer in Brazil. A friend, Chris, took a different route entirely when he invested in this country. He shopped on the local market and did quite well with the purchase of a house on the beach. One reason, I’d say, is because he didn’t approach the purchase purely as a profit opportunity. Chris found a comfortable house right on a beach he loved for what he determined to be a greatly undervalued price. He and his wife Janet made the purchase believing they would realize a good financial return if and when they decided to sell; however, more than that, they bought because they’d found a place where they wanted to be.

Chris and Janet invested in a 2,000-square-foot house only 25 feet from the high-tide line on a reef-protected beach for just under US$62,000 (at the exchange rate at the time). The home was located on the causeway-connected island of Itamaracá, in Northeast Brazil’s state of Pernambuco. Island rental histories indicated that the property could earn in excess of 6% net annual return as a vacation rental on the local Brazilian market. Chris bought with a realistic expectation of capital gain and a realistic backup expectation of cash flow.

It wasn’t long after Chris and Janet moved in, however, before word got out. Other foreigners from the United States, Canada, and the UK started buying up the remaining beachfront properties on the island. As inventory dwindled, prices went up. At the same time, the dollar began to fall against the Brazilian real, making Chris’ property more valuable in dollar terms. After just 10 months, Chris sold his house for 78% more than he’d paid. That’s a gross annualized gain of 93.7%.

Expenses associated with the purchase, the sale, and capital improvements Chris made totaled about US$19,000. Taking that into account, the net gain was almost 47%, and the net annualized return was better than 56%.

A very successful investment experience by anyone’s standards. Part of the success here, as in our pre-construction developer purchase example, is owed to the fact that Chris bought for cash. The fall of the dollar following his purchase worked in his favor. The reais he walked away with after selling bought more dollars back home. Had he financed the purchase, his U.S. dollar payments would have gone up as the dollar weakened.

Chris was also successful because he was on the ground. Prior to buying, he spent time scouting the nooks and crannies of the Brazilian coast. This was how he found the island of Itamaracá. Discovering good local deals is much easier if you’ve got time for firsthand exploring. And firsthand exploring can be a big part of the fun.

Chris’ discovery of Itamaracá was a big deal. Finding an undervalued market with a dwindling inventory takes time and experience, and Chris enjoyed big rewards for his effort in the form of capital appreciation. Chris was also lucky. His capital returns were compounded by a currency gain. This no one can project or predict, and, as with the buyers in Fortaleza, this could have gone the other way. A strengthening dollar could have eroded Chris’ gains, leaving him with more modest profits.

When I asked him about his experience buying and selling in Brazil, though, Chris’ initial response didn’t have anything to do with the profits he’d earned or the currency gain he’d enjoyed. “It was one of the best years my wife and I have spent,” he told me, “living in that house on that beautiful beach. We’ll always remember that time.”

That’s a successful real estate investment overseas.

Kathleen Peddicord

Continue reading: How To File Form 8938 As An American Abroad

Comments

Tags: 'investment''real estate'businessdeveloperfinancingoffshoreoverseaspre-constructionprofitsproject
Share83Tweet52
Previous Post

Tax Benefits Of Investing In Property Overseas

Next Post

How To File Form 8938 As An American Abroad

Kathleen Peddicord

Kathleen Peddicord

Kathleen Peddicord has covered the live, retire, and do business overseas beat for more than 30 years and is considered the world's foremost authority on these subjects. She has traveled to more than 75 countries, invested in real estate in 21, established businesses in 7, renovated historic properties in 6, and educated her children in 4.

Kathleen has moved children, staff, enterprises, household goods, and pets across three continents, from the East Coast of the United States to Waterford, Ireland... then to Paris, France... next to Panama City, where she has based her Live and Invest Overseas business. Most recently, Kathleen and her husband Lief Simon are dividing their time between Panama and Paris.

Kathleen was a partner with Agora Publishing’s International Living group for 23 years. In that capacity, she opened her first office overseas, in Waterford, Ireland, where she managed a staff of up to 30 employees for more than 10 years. Kathleen also opened, staffed, and operated International Living publishing and real estate marketing offices in Panama City, Panama; Granada, Nicaragua; Roatan, Honduras; San Miguel de Allende, Mexico; Quito, Ecuador; and Paris, France.

Kathleen moved on from her role with Agora in 2007 and launched her Live and Invest Overseas group in 2008. In the years since, she has built Live and Invest Overseas into a successful, recognized, and respected multi-million-dollar business that employs a staff of 35 in Panama City and dozens of writers and other resources around the world.

Kathleen has been quoted by The New York Times, Money magazine, MSNBC, Yahoo Finance, the AARP, and beyond. She has appeared often on radio and television (including Bloomberg and CNBC) and speaks regularly on topics to do with living, retiring, investing, and doing business around the world.

In addition to her own daily e-letter, the Overseas Opportunity Letter, with a circulation of more than 300,000 readers, Kathleen writes regularly for U.S. News & World Report and Forbes.

Her newest book, "How to Retire Overseas: Everything You Need to Know to Live Well (for Less) Abroad," published by Penguin Random House, is the culmination of decades of personal experience living and investing around the world.

Related Posts

Alfama at night, Lisbon, Portugal
How to

The Perfect Time For An Overseas Property Purchase?

by Live and Invest Overseas
February 5, 2021
0

Thinking about making an overseas property purchase can arouse feelings such as excitement, fear, anxiety, relief, and accomplishment. Even seasoned...

Read more
Colonial style buildings line the Plaza Machado in Old Mazatlan, Mexico

Why Mazatlán’s Historic Center Is The Ideal Second Home

February 4, 2021
Cathedral at Plaza de Armas, Durango, Mexico.

Introducing Durango: Bargain Real Estate In Authentic Mexico

February 1, 2021
Beach in Cancun, Mexico.

Move To America’s Most Popular Expat Destination In 2 Weeks

January 28, 2021
White sand beach in Playa del Carmen, Riviera Maya, Mexico.

Top 13 Reasons To Buy Property In Mexico Today

January 27, 2021
How To Invest In Property 101: The Pitfalls You Should Avoid

How To Invest In Property 101: The Pitfalls You Should Avoid

January 18, 2021
Tropical waterside house with moored boat on lagoon side of Placencia in Belize.

Buying Real Estate In Belize: What You Need To Know

January 12, 2021
Next Post
pink highlighter pen ticking boxes

How To File Form 8938 As An American Abroad

A world full of fun, adventure, and profit awaits! Sign up for our free daily e-letter, Overseas Opportunity Letter, and we'll send you a FREE report on the 10 Best Places To Retire In Style Overseas Today.

Start Your New Life Today, Overseas

how to retire overseas

LIOS Resources


  • New To LIOS
  • Ask An Expert
  • Media Center
  • Contact Us
  • FAQs

Quick Links


  • Best Places To Live
  • Best Places To Retire
  • Finding A Job Overseas
  • Real Estate

Sign up for our free daily e-letter, Overseas Opportunity Letter, and get your FREE report: The 10 Best Places To Retire Overseas In 2021

  • About Us
  • Contact Us
  • Privacy Policy
  • Terms
  • Unsubscribe

© 2008-2021 - Live and Invest Overseas - All Rights Reserved.

No Result
View All Result
  • Home
  • Countries
  • Budgets
  • Archives
  • News
  • Events
  • Bookstore
  • Newsletters
  • About Us
  • Members Area
  • Contact Us

© 2008-2021 - Live and Invest Overseas - All Rights Reserved.

WANT TO RETIRE OVERSEAS?

Sign up for our free daily e-letter, Overseas Opportunity Letter, and we’ll immediately send you a free report on the 10 BEST PLACES TO RETIRE in style overseas. Each day you’ll learn about the best opportunities for international living, retiring overseas, offshore diversification and asset protection, and investing in real estate around the world.

This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.