The Cheapest Way to Own Beautiful Beachfront
Date: 04/16/2008
Even the back units of this development will have great ocean views.
Wednesday, April 16, 2008
Fortaleza, Brazil
Read more about Brazil in International Living Postcards—your daily escape
I’ve just come from a meeting with one of Fortaleza’s biggest builders. Last night, he held a pre-launch reception for his latest development: 222 condos on a beachfront site adjacent to a planned golf course, and near Beach Park, the biggest water park in Latin America. The 65-square-meter (700-square-foot) units were priced at $100,000; 126-square-meter (1,356-square-foot) duplexes were priced at $200,000.
The reception was attended by friends, family, and contacts of the developer (all Brazilians)...and 80% of the units were snapped up. Families bought entire blocks (six units) to use for vacations when they want to escape the city. (This development is about 10 miles outside Fortaleza.)
I saw the site—beautiful beachfront that slopes gently toward the ocean—and loved it. Even the back units will have extensive ocean views (see the photo above). But what really got my attention was the payment terms.
Before I go any further, I should break the bad news...I just got a phone call to say that this project is now 100% sold out. That’s right: The entire 222-unit project sold out in less than 24 hours. As I told you on Friday, this market is hot. But don’t worry, we’ll be ready next time. For now, let’s use this as an illustration of the types of financing available right now on Brazil’s northeast coast.
Money is expensive in Brazil. Savings on deposits earn 12%, a car loan will cost you 18%, and a developer would pay interest rates substantially above this to finance construction. Mortgages are difficult even for Brazilians to secure. So, because capital has such a huge price, developers drag out the construction time frame to get as much cash in the door as possible during the build period. That can mean attractive terms for you, the buyer.
There are three different payment terms for pre-construction in Brazil. The first is a small down payment, followed by small monthly payments, and then the final payment on completion. The terms for the project I mentioned above were attractive. Buyers could secure a unit with just $570 down and 43 monthly payments of $570, before the final payment of $75,000 is due in November 2011. (And buyers aren’t paying a premium for this type of structure.) I have never seen pre-construction payment terms this attractive. Typically, these terms aren’t offered to non-Brazilians...but I’m investigating a way around this. Stay tuned.
Your second option in Brazil (though not for this specific project) is the traditional 20% down and 80% on completion (sometimes this is split 30% down and 70% on completion).
Your third option is to pay 100% down. Everything down to buy pre-construction? I know what you’re thinking—I must be crazy to even suggest it. But these can be the smartest terms. Pay 100% upfront, and as well as enjoying uplift during the build period, you can expect a 30% discount on today’s market price. Such a genuine discount is unheard of in any other pre-construction market that I know of right now.
I’ll investigate a deal like this later in the week, and share full details—including photos and (amateur) video—in IL's first-ever Brazil Beachfront Webinar. As an IL Postcards reader, you get to sit in on the webinar...free.
Ronan McMahon
For International Living
P.S. Watch out for my column in the May issue of International Living magazine, where I tell you about the cheapest places in Costa Rica to buy lots with beautiful beach, valley, or lake views. You could own your very own custom-built, 2,000-square-foot home on a large lot for only $170,000. Find out how to subscribe to International Living magazine.
Editor’s note: Ronan McMahon is executive director of Pathfinder. Pathfinder’s mission is to scour the globe to find the most unique and value-orientated real estate opportunities the world has to offer. He is in Brazil right now with Len Galvin, IL’s editorial director, shooting footage for the Brazil Beachfront Webinar.
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