The last couple of years, Brazil has finally proven to the world the growth potential the country has. While the rest of the world is still in recession, the Brazilian economy is growing and several leading economists believe that Brazil will be the 5th richest country in the world by year 2020. To no surprise, the positive media attention Brazil has received lately has also led to an increasing number of foreign property investors starting to look for real estate in Brazil.
This article aims to highlight the most common mistakes foreigners do when they consider buying a property in Brazil. Here are our top 3 tips for making a solid Brazil property investment in 2010:
It is not all about the price
Many foreign investors look for the cheapest possible Brazilian property they can find. For some reason many foreigners still think that Brazil is a banana republic. While this was maybe true 15 years ago, Brazil today is a different breed altogether. Like in the rest of the world, the old and tested rule of "location, location, location" is valid when buying Brazilian real estate as well. Properties in Brazil that enjoy a good location will always be in high demand for rental and resale purposes. Trying to find the cheapest possible property in Brazil is a very big mistake, as cheap properties never enjoy from a highly sought after location. For investment purposes, it is far better to buy a property in a good area. That way the property will generate healthy rental returns and there will always be clients interested in buying the property from you in the future.
Don't focus solely on beachfront
Another big mistake many foreigners do when they consider buying a property in Brazil, is that they have a very fixed idea that the property has to be beachfront. While a beachfront property can be an excellent option, it is far more important to first select the right area. Even though Brazil has an approx. 7500 km long coastline, it does not mean that every inch of the coastline has investment potential. The already established locations in Brazil usually have very few beachfront properties for sale, and the few beachfront properties for sale are usually too expensive to offer good investment potential. Usually it is far better to be a bit away from the beach in a good and popular area, than being beachfront in a deserted area. Few people will want to rent a property in a remote area and it will be very difficult to resell the property to a future client, as the area is not desired.
Forget about Payment terms
While it is true that good payment terms can provide extra leverage on your investment, many investors put too much emphasis on payment terms. Remember that you will only make profit on a Brazil investment property if a future client is willing to buy the property from you at a higher price than you paid for it. If the property is not in the right location or the build qualities are not up to scratch, it simply does not matter what payment terms a property offers.
Property investing is all about paying a price that is lower than the future selling price will be. The property must offer the end user with living experiences he is prepared to pay for. This is basically achieved in two ways:
1. The location must be right for the client, and
2. The property itself must offer the qualities and appeal the client wants from a property.
Few final end user clients are prepared to pay any price for a property that is in the wrong location. It does not matter if a property sells for a very cheap price if the location is not attractive enough to appeal to future prospective end user clients. Remember this: The only way to make a profit from a property is to sell the property to a future client for a higher price than you paid for the property. This basic rule applies as well for properties in Brazil.
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