Why a Brazilian Would Want to Rent a Tiny Condo by This Beach

We stepped out of the car and into the warm Brazilian sunshine. It was a typical December day in Northeast Brazil: blue skies, comfortable temperatures, and only a smattering of clouds in the sky.

My buddy and I had just arrived in Fortaleza on a flight from Recife. Before doing anything else, I had one stop on my agenda: Sunday afternoon on the beach of Praia do Futuro.

I told my buddy, who’d never been to Brazil, that he was in for a treat. Whenever I’m in Fortaleza, I make a trip to Praia do Futuro: a stunning beach that stretches for miles, right on the edge of Fortaleza.

It was already busy when we arrived—it always is on Sundays. Brazilians bring their whole family to this beach regularly. Toddlers splashed in the water with their parents. Some kicked a ball around on the sand. Sunbathers worked on their tans.

Once we got ourselves settled, we shared a table of fried fish, pineapple, shrimp, and cold drinks. I worked it off with a lazy massage. As the day drew to a close, we, along with the locals, headed to the parking lots across the street, got in our cars, and drove home. My home for the next week was a condo right on Fortaleza’s glimmering boardwalk.

For me, this trip wasn’t all play and massages on the beach. That was just a perk of the job. In actuality, I had boots on the ground in Fortaleza to look for real estate investment opportunities. Through a local contact, I caught wind of a killer one—one of those parking lots right across from Praia do Futuro.

The property on offer was a piece of land. It was in use as one of those parking lots. Then, the owner died. The lady who inherited it needed fast cash. So I was able to lock down a piece of land here cheap. This prime piece of land cost me just over $200,000.

I got a screaming good deal—what Brazilians call a “dead chicken” deal. That’s a meal so easy that you don’t even have to chase it down. It serves itself up to you. It’s the equivalent of what people in the States call “low-hanging fruit”…or what I tend to call a “no-brainer” deal.

I have big plans for my buy. For now, I can continue to collect fees while it’s still used as a parking lot. But I’m thinking bigger. I’m planning to build on it.

I’m planning to build 30 little condos, each 400 square feet in size. To a North American, that sounds tiny—who would want to live in a place that small?

The answer: Latin Americans. All across Latin America, professional people choose to live in smaller condos rather than to share. Condos like the ones I’m planning to build here are part of this growing trend right across Latin American cities.

If you’re wondering why people in Brazil don’t just take a roommate, believe me, I’m stumped as well. I’ve asked a lot of Latin Americans and Brazilians that same question. No one can tell me why they won’t live with a roommate. They’ll live with a sibling but that’s about as far as it goes. Most want and choose to live alone. It just seems to be a cultural thing.

So a compact condo in a good location will be snapped up. But in Fortaleza, they’re in short supply. The rental market offers stunning, spacious luxury condos in high-rise apartments overlooking the boardwalk. Outside of that, you’re looking at dive apartments away from the action. There’s little in between.

When a compact condo is available, middle-class professionals and students will jump at the chance to rent it. Some will use it as a base—like the brother of one of my contacts in Brazil. He’s a pilot living in the south of Brazil. He keeps a studio condo in the Northeast as a base. It’s a very common thing.

That same contact’s receptionist would also want one of these compact condos. Right now, she has to commute to work in Fortaleza. There’s nothing suitable for her to rent closer to her job. So, she has to drive a long way in and out of the city every day.

She’s just the sort of person I expect would rent one of those 30 condos. By targeting these professional people, and students, I expect to do well when these condos are built out.

My costs are low for a project of this size. I got in at just over $200,000 for the land. From there, in dollar terms, the construction costs are really low. You could build one of these 400-square-foot condos for only $12,000. I’m not talking a luxury finish. But finished to local middle-class standards.

When these are built out, I plan on targeting rental income of $80,000 gross a year—about 14.5% gross annually on my total investment (including construction costs).

Thing is, I only expect these rental rates to rise. Over time, I expect my latest investment will be quite the little cash generator.

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