Monday, March 14, 2011
Dear Reader,
The rental market in Fortaleza, Brazil is strong, both for short-term and long term rentals. The city is the top domestic tourist destination, and it also attracts business travelers. Demand is high year-round for short-term rentals, particularly at peak times (Christmas, New Year, Carnival).
There’s a rising demand for quality long-term rentals. My contact on the ground Daniel Neves is a landlord here. He rents his units long-term. This is what he says:
“What we discovered is that there is a new growing demand for nicely furnished apartments to be rented in long term contracts for young professionals moving to Fortaleza to take up new jobs or to expand their companies here. They don’t want to buy an apartment, or rent an unfurnished one. They want to move into an ‘all inclusive’ apartment and worry only about their work.
All these people belong to the upper middle class. They are used to a very good level of life. So, they want to live in a furnished apartment, in a good neighborhood, full of restaurants and bars and they want to be walking distance from the beach.
They don’t mind paying more rent than average to live in a nice-looking place because this is going to be their home for a few years and they want to impress new friends.”
Today, there is a pocket of opportunity right in the heart of downtown Fortaleza. I’m talking about an area that has been neglected…but whose fortunes an ambitious plan is about to change.
Here you can charge top dollar for your rentals but the property you buy comes at a substantial discount to property on Fortaleza’s boardwalk.
Iracema Beach is immediately to the west of Fortaleza’s bustling boardwalk—the tourism, social, entertainment, and high-end real estate center of Fortaleza. Property prices have doubled here in the past three years.
Ocean view condos on the boardwalk sell for up to $4,500 per square meter. (That’s approximately $450,000 for a 1,000-square-foot condo.) Rentals stay full and charge top dollar. This is where Brazilian millionaires and billionaires own condos; some as big as 5,000 square feet.
Today the boardwalk is fully built out.
Iracema beach hosted 1.1 million revelers for the 2010 New Year’s party. Concerts and major beach volleyball tournaments are a regular fixture. But visitors prefer to stay along the buzzing boardwalk. Now Iracema is getting a facelift as part of a $5.8 billion dollar investment in tourism and infrastructure:
- $135 million will be spent on the new Aquarium (set to be the largest in South America)
- $10 million is to be spent on the culture center renovation. (This is Fortaleza’s art and theater center.)
- $30 million is being invested in a general upgrade of the area including an extension of the boardwalk.
The boardwalk extension will include Iracema Beach. Iracema’s dingy bars will be replaced with more family friendly amenities…three-star hotels with shiny new condo buildings and hotels. Families on vacation will want to stay here…as will visiting executives.
Three years from now, there will be no visible break from the existing boardwalk to the new one along Iracema Beach. Yet today prices are 22%-60% lower in Iracema than along the current boardwalk.
As Iracema becomes part of the boardwalk, I expect its prices will catch up with boardwalk prices.
Studio Iracema is located in the heart of Iracema Beach. This area was re-zoned a couple of years ago, bringing the maximum height down to 48 meters. This project was the last to be approved under old zoning laws. It is 72 meters high. The higher floors should always have unobstructed views.
Prices for one-bedroom Studio Iracema units start at just under $113,000. This studio is the cheapest entry point you can find in “prime” Fortaleza.
The condos are ready for delivery and to start generating income.
I expect these units would easily rent to a young professional for $900 per month. That gives you a gross yield of around 9.5%. Rent to the short-term market and you could do better, if you are willing to work it.
My contact on the ground, Daniel Neves and his team, are standing by to send you a full information pack on Studio Iracema.
Ronan McMahon
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