The short-term rental market in Fortaleza, Brazil is strong right now. For example, in one recently completed building in the Iracema Beach area (where I’ve visited several times), condos rent for $100 per night.
A condo like this would have set the buyer back $100,000 or so when they bought pre-construction a few years ago. That means that if this condo is occupied just half the time at this nightly rate, the owner’s gross yield is 18%.
There are no reliable stats on occupancy rates for short-term rental condos (or even hotels) in Fortaleza. They like to keep their business to themselves. With yields like these, I can understand why.
So, we have to piece together the picture from our experiences and the experiences of others we trust. My experience is one of year-round demand…even shortages.
The demand is driven by:
– The 3.3 million domestic tourists who will likely visit Fortaleza this year…
– And the army of specialist employees relocating to Fortaleza from the south of Brazil, Europe and the U.S. to deal with the skills shortage their booming economy has produced.
Tourism and executive relocations are growing…while at the same time there is already shortages in hotel and short-term rental beds.
In fact, if you tried to book a condo in the building I’m talking about for Carnival next year (as I recently have) you would be out of luck unless you happen upon a cancellation. Same with New Year’s. I don’t know how much it would have set me back but it certainly would have been more than the standard rate of $100 per night.
That’s not so surprising. In South America’s hip spots, a short-term bed these weeks is like gold…and comes with a steep price. But unlike these other hotspots, Fortaleza doesn’t have a short season.
The short-term rental market in Fortaleza appeals to investors because we can rent our units almost 12 months a year. Tourists come pretty much year-round. It can be rainy in April and May…when the conventions come. The short-term executive market is independent of weather or party season.
This short-term rentals business operates more like the hotel business than regular rentals. Your biggest competition will come from hotels. That’s good news in Fortaleza because there is a shortage of decent hotels in the boardwalk area where tourists and executives want to stay. You could end up paying $400 a night for an average hotel—even in low season. Owning one of these hotels is like a license to print money.
That’s why it’s important to use a management company who knows this business…and to buy in a modern building…and fit out to the spec that will appeal to this market.
Do this and I think you could do better than renting your condo every second night. But at 50% occupancy you are still doing well (even allowing for bills and the management company costs). Plus, demand is rising.
The future is bright for Fortaleza and her short-term rentals market. I’ve personally invested in this market—and through the contacts I’ve made, I’ve learned of the next opportunity on these shores. It’s going to be big. Full details here.
Editor’s Note: Ronan McMahon is a director of Pathfinder, IL’s preferred real estate advertiser.