Posted by: davidgarnerconsulting | September 3, 2009

Brazil Property Investment – The Basics

Download your FREE GUIDE TO REAL ESTATE INVESTMENT IN 2009 – Authored by David Garner – Managing Partner of David Garner Consulting – The What, Where, When, How, and Why of investing in property in 2009 – Please give the site a chance to load.

For those of you who read my last post you will know that I have spent the best part of the last two months reviewing and researching a structured land acquisition real estate investment in North East Brazil, specifically the Coral Lake and Beach Resort in Flexeiras, around the area that a lot of you keen investors will aleady know, Fortaleza.

As I have mentioned I have spent a lot of time and effort runing a comprehensive due diligence on this project at the request of a small syndicate of investors I work with in the UK. I was originally approached by my clients – for whom I have providing advice and execution on a number of real estate transactions for 3 years – two months ago, as they had been approached by The BRIC Group and offered the opportunity to invest in the Coral Lake and Beach Resort.

I have been working with these type of buy and build or structured exit strategy land acquisition project for four years and I have successfully invested and helped my own clients to invest in six of these type of projects so I was well placed to offer my opinion.

First things first, lets talk Brazil. I have worked in North East Brazil before back in 2007, specifically in Natal which roughly speaking, is in the same region as Fortaleza et. al. As such I already have an opinion as to whether this area of the world makes for a good investment opportunity as I have already spent and made money there, however that opinion is now two years old and deserves re-visiting for sake of accuracy of advice for my clients.

Download your FREE GUIDE TO REAL ESTATE INVESTMENT IN 2009 – Authored by David Garner – Managing Partner of David Garner Consulting – The What, Where, When, How, and Why of investing in property in 2009 – Please give the site a chance to load.

I have always stuck to the same old opinion when evaluating the “investability” of an area which has served me very well over the years, and that opinion  is one of evaluating the demand, current and future, and supply of residential and commercial property in the area.

To make this a more digestable post I will list in bullet points, (with a brief explanation), each of the key drivers for demand in this area below:

Economy – For me Brazil gets a huge tick, strong GDP growth consistently, currently showing a growth of 5.1% even in the current climate, compare that to Britain with a projection of 1%, sound macro-economic policy, some of the largest oil reserves in the world, inflation falling, poverty percentage falling, (6 million Brazillians moved out of poverty last year), unemployment falling at 7.6% and an emerging middle class buying secoind homes on the coast. It is worth noting that over the last 10 years Brazil has borrowed some $25 billion from the IMF, this year they lent the IMF $10 billion, a great sign of an emerging economy with more in the way of reserves and resources than our own ailing western economies. Inflation in Brazil is only 4.26%, the lowest for 8 years. The governament have also increased the minimum wage by 50%!

Demograhics – 184 million people, growth of 1.548% per annum means 1.8 million new Brazillians a year (think housing).

Crime Rate – North East Brazil has the lowest crime rate in the country

Financing – Brazillians can now buy a property with a mortgage whereas before they has to use cash, this opens up the market hugely and brings millions of potential 1st time buyers onto the market as the government is subsidising 1st time buyer mortgages by 50%. It will not be long beofre off-shore buyers can access mortgage finance and in my opinion, buying before they do puts you in possesion of a commidity that will be in super-high demand.

Download your FREE GUIDE TO REAL ESTATE INVESTMENT IN 2009 – Authored by David Garner – Managing Partner of David Garner Consulting – The What, Where, When, How, and Why of investing in property in 2009 – Please give the site a chance to load.

Investment – Three words – World Cup 2014 – OK well its two words and some numbers but still, whilst in Brazil I had the pleasure of attending a presentation from the Minister for Tourism and as the North East is playing host for the football, the fallout effect for savvy investors will, in my opinion, be huge. According to the good Minister $1.7 BILLION dollars has already been invested in infrastructure projects for the area, think roads, transport links, sporting and accomodation facilities etc, and I had the oppotunity to see some of this with my own eyes whilst there and they truly are turning a sleepy beautiful area in a well communicated beautiful area. The most exciting thing however was that the government have set aside a further $7.5 billion dollars in infrastructure projects for the area between now and 2014.

External Tourism – This is a great one, the North East is only 6.5 hours flight from Europe and Fortaleza has a new international airport accepting direct flights, (incidentally designed by MD-Concept, the same company that is building Coral Lake and Beach Resort). Americans and Canadians are seeing Brazil as a great holidat and retirement option, I also saw large numbers of Scandinavians, British, Itlaians, Dutch, Germans and the odd Irishman holidaying and buying up properties in the area. Brazil recieved some 6 million foriegn tourists last year an increase of 15% on the year before so whilst more traditional locations are suffering, Brazil is showing heavy growth and progress. Brazil also accounts for 10% of the worlds eco-tourism.

Internal Tourism – With the previously mentioned emerging middle classes, some 25 million Brazillians visited the coast for a holiday last year, that figure is increasing year on year with most Brazillians choosing either in and around Fortaleza and Rio as their preffered destinations.

That pretty much concludes the case for the North Eats of Brazil, in my next post I will go into detail on the development Coral Lake and Beach Resort.

Download your FREE GUIDE TO REAL ESTATE INVESTMENT IN 2009 – Authored by David Garner – Managing Partner of David Garner Consulting – The What, Where, When, How, and Why of investing in property in 2009 – Please give the site a chance to load.If

you would like more information on this subject, or you would like to discuss your real estate investment requirements, EMAIL ME at davidgarnerconsulting@gmail.com

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