A Real Recommendation | Pathfinder International

Wednesday, June 17, 2009

Dear Reader,

The type of real estate I recommend to you in Brazil is typically prime pre-construction, usually with preferential terms such as a 1% down payment with monthly stage payments of 1%.

Real estate in Brazil is priced and sold in the local currency—reais. Buying a condo for BRL 190,000 involves a down payment of BRL 1,900. You then make monthly payments of BRL 1,900. Today BRL 1,900 is $964. This time last year it was $1,150. Who knows what it will be tomorrow?

Locking in today’s exchange rate would seem like a sensible option to make sure you know what your cash flow will be.

The folks at Everbank have a three-month BRL CD that pays 6.5%. Move your U.S. dollars or other currency into this CD and you will lock-in today’s exchange rate while earning 6.5% interest on the BRL deposit.

Some of you already do this. This is an e-mail I received from one of your fellow readers last week: “I hedge the Brazilian currency through an Everbank Brazilian Real CD account. I did that for the Beach Class project. I put $100,000 into this account which yields 7% +/- to cover the BRL229,000 cost when the real was 2.29 to the dollar. As of today it is 1.945 to the dollar. Had I not done that, I would have lost nearly $18,000 just in the first few months! Instead, I hedged the currency so it has not cost me anything above what I budgeted, and the property has appreciated $18,000 and I have earned about 7% on my money!”

To review all the details about the three-month BRL CD, take a look at the Everbank website.

Ronan McMahon