The short-term rental market in Fortaleza, Brazil right now is a gift to investors.
The demand for short-term rentals in this city is strong. This is one of the reasons I remain bullish about this real estate market. But the supply of suitable units is tiny by comparison. This trend is a big factor in the type of condo units I have recommended to members of Real Estate Trend Alert when we talk about investing in Brazil.
One member I know who invested in the Beach Class condos recently spent a month exploring the coast around Fortaleza. He wanted to use the boardwalk area as his base. A short-term rental was the obvious answer…but agent after agent told him the same thing–"sorry, no rooms to let." Finally, through one of our contacts in Fortaleza, he managed to secure a rental that isn’t even officially on the market…for which he’s paying 200 reis ($85) per night.
Invest in Brazil: What Are the Key Drivers?
This supply shortage is big news in Fortaleza. One of the city’s leading newspapers, O Povo, writes that the market is currently running at close to 100% occupancy. The key drivers are vacationers, business travelers, company executives, and retirees from southern Brazil.
My own contacts tell the same story. Carmen Ary Ferreira has been in the rental management business in Fortaleza for 15 years. When I met her seven months ago, she was seeing a strong short-term rental market. But today she is seeing 100% occupancy. In an e-mail she sent yesterday, she says: "Ronan, I manage 150 apartments and not one is available tonight.” She hasn’t seen anything like this in 15 years.
This is good news for members of Real Estate Trend Alert who have purchased units such as Beach Class and Camino das Aquas. These units will be perfect for short-term rental, a big point in their favor. I have visited flats (serviced condo suites) currently on the short-term rental market in Fortaleza. Typically their amenities are limited to restaurant, laundry, and room service. They are dated and of average quality. The units Real Estate Trend Alert members have bought will have five-star amenities. Pools, gyms, health and beauty centers…all the bell and whistles a business traveler looks for, including meeting rooms and party rooms for when the work is done. These will rent fast and command a premium.
Will an Investment in Brazil Now Go Up?
I expect short-term rental demand to continue to increase in the coming years, especially as there is a limited supply of quality hotel beds in this area. The Brazilian economy is growing, and the local economy here is growing faster. Tourist numbers are up and ever more people are relocating from the congested and expensive south of Brazil. Major infrastructure projects including a $16 billion oil refinery are on the way to the area.
Of course this wouldn’t mean much if supply was also rising. But it’s not. In fact, it can’t. There is practically no development land remaining on or around the boardwalk area. Increased demand will drive rates higher.
I went into this idea in more detail on a recent conversation I had with IL Publisher Dan Prescher. We recorded the whole thing…and you can listen to it right now…free. Enjoy.
Ronan McMahon
Executive Director, Pathfinder Ltd.
P.S. I recommended the smallest units (40 square meters) in the Camino das Aquas project to members of Real Estate Trend Alert. They will be perfect for rental and are located on the best site in Fortaleza. I reserved two of these units for myself. We got access to these units three weeks before local insiders. The prices we paid were lower than those offered to the local market. Our terms are 1% down and monthly payments of 1% over the build period. We visited the site on our recent Real Estate Trend Alert scouting trip. We were glad we got in ahead of the local market…because the project was completely sold out the morning of the launch.
P.P.S. Real Estate Trend Alert is accepting new members now…here’s everything you need.
More IL Articles About Fortaleza, Brazil:
Why Now Is the Time to Invest in Fortaleza…
