Strong economic growth has created a boom in Brazil’s buy-to-let market. Below are some factors to consider when researching your buy-to-let property investment in Brazil.
The term "Buy-to-Let" simply means the purchase and ownership of a property through the normal purchase procedure in Brazil and when completed, the owner seeks to rent this property out for a regular income usually exceeding annual mortgage repayments.
Brazil deserves some serious consideration as a location for those looking to buy property overseas. With capital growth in Brazilian property at around 20% per annum in recent years, Brazil beats other high performers in Europe such as Spain (17 per cent) and France (10 per cent).
High levels of inward investment and a generally stable economy have made Brazil a safe arena in which to invest and an increase in the amount of tourists entering the country can only be encouraging news to all investors in buy-to-let options. The climate and lower cost of living make Brazil a destination much in demand for those looking to buy property abroad as a holiday home, as well as for more "serious" investors.
The Brazil Tourism and Culture Movement aims to transform the country into one of the twenty most attractive tourist destinations of the world. Current plans are aiming to attract more tourists to Brazil and achieve 2007 objectives stipulated by the ministry of tourism of a total of 9 million visitors and around $8 billion (USD) in revenue for the country.
Purchasing a property to let in Brazil will involve careful consideration as to whether or not the property is ideally located for tourists, while careful analysis will need to be done on matters such as tourist amenities and accessibility to airports as well as what type of tourist will be visiting. Early investment and the correct formula to suit your market will bring you excellent returns on your buy-to-let property in Brazil.
John decides to purchase an investment property and he decides that the "Buy-to-Let" investment strategy is for him.
John has savings of around €80,000.
Our investment advisors suggest property development X which has been vetted as a solid investment opportunity and meets with John's deliverable criteria.
Investment property X is a new development with beautiful sea views and priced at €250,000.
Initially John pays his reservation fee of €3000 to hold the property.
Next John pays a 30% deposit of €75,000 (minus his €3000 reservation fee already paid). Our investment specialists negotiate a mortgage for John for the remaining €175,000 at a rate of 2.75% (example only) this translates to a monthly mortgage repayment of €481.00 (interest only) which is equal to €5772.00 over 12 months.
John starts to rent his new property immediately and during the 3 months "High Season" he receives €2000 per month in rental income. These rental payments exceed his annual mortgage repayments and still leave John with 9 months of rental potential to make a further profit.
If we assume that average rental rates for John’s new property are as follows (conservative figures):
Now we assume that John decides to go on a short term rental strategy maximizing his income over the High Period. He easily rents his property for 3 Months during the high period earning €2000 per month. After this period he has a delay in getting his next tenants but over the course of the year he rents his property for a further 6 Months only.
Total Rental income = €13,800 after subtracting the €5,772 Mortgage repayments John has made a profit of €8,028.
* In this example we have not included any rental management or community fees that may apply but also we have only assumed rental income for 9 months of the year and with many holiday makers now booking private accommodation via the Internet this is very achievable.
The final decision to be made by the "Buy-to-Let" investor is which letting strategy to use. It is obvious that the highest income is made by the property owner by short term letting during the high season. However you must bear in mind increased overheads due to constantly finding short term rental clients, as well as maintenance costs between clients.
Long-term rentals typically pay less per month but usually require far less input from the property owner. Some property owners choose to rent long-term during the low season, then short-term to higher paying tourists during the high season. The decisions to be made regarding your letting strategy are usually answered in part by the type of property you purchase
The “Buy-to-Let" strategy is an important formula to get correct as even in a very busy market there is still competition. In order to maximize occupancy rates it is vital that you correctly select your location, property, unit and monthly rental charge as these factors will directly effect occupancy and, in turn, your rental income.
This type of investment brings the added benefit that during the time your property is being rented out and earning you an income, it is still appreciating in value at one of the fastest rates available, while someone else is paying your mortgage. Meanwhile it is providing an off-peak holiday home for your personal enjoyment.
Buy-to-Let investments are catching on fast in Brazil as investors now consider them to be a sound investment decision.
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