The short-term rental market in Fortaleza, Brazil, is strong. Quality condos (typically, small two-bedroom units) in the Beira Mar area of the city rent for $84 a night in high season and $63 a night in low season. Members of my Real Estate Trend Alert service have bought such condos in recent months (preconstruction) from as little as $76,000. For the past few months, occupancy is running at close to 100%. Expect the same during the summer months.
Outside of the peak Brazilian holiday periods, the market is mostly business travelers, vacationers, and investors, and locals with a short-term accommodation requirement. Buy well and you can net 15% rental yields in this market. Plus, you’ll be buying into a market that’s showing capital appreciation.
One of the buyers at Beach Class (a project in Beira Mar, mentioned above) recently put the short-term rental market in Fortaleza to the test. He wanted to spend a month along this stretch of coast, using Fortaleza as his base. The good news was that this short-term rental market is stronger than we hoped…the bad news was he couldn’t find anywhere to stay. An exhaustive search of agents proved fruitless. Finally, through one of our contacts in Fortaleza, he managed to secure a rental that isn’t officially on the market. He is paying $84 a night.
Established 15 years ago, Flat Shop is a family-owned-and-operated rental management company. Situated on Praia de Iracema right in the heart of Fortaleza, Flat Shop is a market leader in apartment rentals. See: www.flatshop.com.br.
On my first trip to Fortaleza last year, I met Carmen Ary Ferreira. As owner of Flat Shop (see sidebar), she has been in the rental management business in Fortaleza for 15 years. When I met her, she spoke about a strong short-term rental market. Today she talks about 100% occupancy. This is something she hasn’t seen in her 15 years in the business.
“I manage 130 apartments and not one is available tonight,” she wrote yesterday. “In fact, we haven’t had any availability since late October.”
This short-term rental shortage is one of the reasons I continue to be bullish about this market. The shortage is most acute at the high end of the market. I have visited flats (serviced condo suites) on the short-term rental market in Fortaleza. Typically, their amenities are limited to restaurant, laundry, and room service. They are dated and the quality is average. The market is looking for units that will have five-star amenities—like pools, gyms, and health and beauty centers.
I expect short-term rental demand to continue to increase in the coming years. The Brazilian economy is growing, as is the local economy, and tourist numbers are rapidly rising. Major infrastructure projects in the area, including a $16 billion oil refinery, are on the way. There is a limited supply of quality hotel beds here.
The type of units that will maximize your rental yield in this market have only recently become available to buy preconstruction. In many cases, flats don’t have the amenities the market wants, while high-end condo buildings units’ price and size mean that yields won’t be what they would be in smaller units. The opportunity here is to buy smaller (40 to 60 square meters) units preconstruction. Buying preconstruction also means that the developer may offer financing. Buy a resale and you will need to be a cash buyer.
