Rental Opportunities in a Relocation Hotspot

Monday, October 11, 2010

Dear Reader,

As a reader of The Pathfinder Alert, you know that I’m bullish on the real estate market in Fortaleza, on Brazil’s northeast coast. Brazil’s growing middle classes drive the market in this area. Today, we have an opportunity to the south of Fortaleza, in João Pessoa. As in Fortaleza, you can position yourself to profit from Brazil’s new middle class.

Let me show you how.

João Pessoa is the capital of the state of Paraíba. Surrounded by miles of beautiful beaches, this is where many Brazilians, retire, vacation and buy second homes. In particular, the city is popular as a retirement destination for senior civil servants, who retire young. They often choose João Pessoa for retirement over their own home cities and towns, elsewhere in the state of Paraíba, or from cities like Sao Paulo and Rio de Janeiro in the south.

The city has seven square kilometers of forest, providing a green backdrop to almost 25 miles of beach. João Pessoa has some of the nicest city beaches you’ll find anywhere. Beachfront properties are still affordable—and they are in hot demand with renters.

The city is one of the oldest in Brazil’s northeast. It’s the most easterly point in Brazil, known as “The City Where the Sun Rises First”. The French, Dutch, Portuguese and Spanish all vied for the city at various stages, trying to control the lucrative sugarcane industry in the area. It’s roughly 75 miles from Recife and 110 miles from Natal.

Despite a population of 700,000, and all the big city conveniences (hospitals, shopping malls, hypermarkets, hardware stores, car showrooms), João Pessoa feels like a small, friendly town. That’s partly down to the easygoing, helpful locals. They’ll chat to you in supermarket queues, and point you in the right direction when you can’t locate a building, even if you don’t speak Portuguese. The pace of life is tranquil, too. Best of all, the crime rate in João Pessoa is one of the lowest of any of Brazil’s state capitals.

One attractive feature is height restrictions for buildings facing the boardwalk. Aside from a handful of older, higher buildings, the boardwalk is limited to three to five stories. That gives the boardwalk and beach area a unique charm, as well as giving ocean views to taller buildings behind the boardwalk. Moreover, it restricts development…and places a premium on boardwalk and beachfront property.

The weather’s warm and sunny year-round…and the beach lifestyle is ideal for younger, health-conscious retirees, and second-home buyers. Social life in João Pessoa centers on the boardwalk, which runs for about 16 miles. The boardwalk kiosks serve juice drinks, coconut water and fruit. Restaurants close by specialize in churrascaria (a mix of barbecued meats), fish, and Italian food.

João Pessoa is a great place to spend time. And you can earn a strong rental income when you aren’t here.

While popular with tourists, João Pessoa doesn’t have much choice when it comes to hotels. The four-star Verde Green is the city’s newest and nicest hotel. Not that it has a lot in the way of competition…the other hotels are two or three star, and “tired” best describes their décor. Yet according to my sources on the ground, estimated occupancy rates average 86% year round. Rack rates in the Verde Green average 193 reals ($110) to 387 reals ($232) a night.

Quality short-term rentals are difficult to find, and command up to 800 reals ($480) per week for a small one- or two- bed unit. The best place to buy for rental…and for a second-home location you’ll enjoy…is in the prime residential area of Cabo Branco.

The city’s protected forest limits development here. This exclusive neighborhood borders the boardwalk. Cabo Branco sits between the ocean and the forest, on a thin triangle of land. You’ll find the city’s nicest restaurants and boardwalk kiosks here, and uncrowded stretches of beach. Cabo Branco is a favorite of holidaymakers, retirees and second homeowners.

Riacho Verde is a small project of 55 units located a block from the beach and in the upscale neighborhood of Cabo Branco. You can see a render of the project superimposed on the photo below (the two brown and white buildings center-right).

Unit sizes here range from 55 square meters (592 square feet) to 133 square meters (1,431 square feet).

The rental demand for this type of condo is strong. The building is to be constructed as a condo building but with hotel-style amenities. The owners will then decide how the building is to be operated.

The developer is a large local constructor with 20 years of experience, and a good track record. Their buildings are usually delivered on time, with a good standard of finishes. Buyers who purchased in their previous development saw strong appreciation over a three-year period of 45% +. Locals snap up this developer’s projects. This is always a good sign.

Projects like this sell fast. They are in hot demand with locals and retirees from the south of Brazil.

I told members of Real Estate Trend alert about this pre-release opportunity last month. RETA members’ pre-release window and special pricing is now closed.

Garden units are available from 266,000 reals ($155, 968). John Curtis, our broker contact in João Pessoa, is standing by to send you a full information pack.

Ronan McMahon