The pure investor seeks to purchase property uniquely as an investment vehicle to achieve maximum short term capital returns within the safest investment market available. Their investment vehicle is represented by the purchase price while the investment involvement is typically only 20-40% of the purchase price.
During the construction period, the developer increases the price of individual units gradually, in stages as the phases of development progress. These price increases mirror the developer’s risk. As the development matures, the developer's exposure diminishes, making it possible to raise the price of their product with each passing stage. From the buyer’s perspective, physical progress is visible, enabling a true “feel” for the property. No longer is it necessary for the purchaser to rely on architects’ drawings when making the decision to invest in a property. The price, however, is invariably much higher than initially for this luxury.
To the pure investor, off-plan purchase creates an excellent investment opportunity. When buying into the development at the earliest stage possible the investor benefits from each of the phased price increases, showing a profit gain of 30%-40% (assuming there are 3 or 4 phase price increases, each of typically 8%-10%).
Later, just prior to completion, the pure investor seeks to re-sell his early investment, bought at the best possible price, to a secondary buyer who normally purchases for the purpose of living in or renting out the property.
Investors buying property in Brazil typically adopt the "Buy-to-Let" strategy. Property prices are still temptingly low and are firmly set to rise in the near future. President Lula’s economic overhaul is under full swing and increased investment in the tourist industry is already bringing unprecedented volumes of tourists to Brazil. With many new developments currently planned and under construction, the current economic climate creates an unmistakable opportunity for the shrewd investor.
Investors are looking to purchase early on developments to secure high quality units in the best locations at the best prices. Capital appreciation in Brazil is expected to be in the region of 20% in 2006.
John decides to purchase an investment property and he decides that he wants purely a wealth-building exercise and that the pure investment strategy is for him.
John decides in conjunction with our advisors, taking into account his personal criteria to purchase a unit on the development "X" at €630,000.
John pays 30% deposit (including his initial reservation fee) which totals €189,000 and signs a re-assignable contract allowing him to sell prior to the completion of the development units.
The project matures and after several phased stages John negotiates the sale of his purchased unit for €925,000 to a secondary home buyer.
To John, this represents a huge profit gained on invested capital of 156% as he has only ever invested the initial 30% deposit into the property.
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