Make Money in Brazil: Buy To Rent in Fortaleza

Minutes from downtown Fortaleza in Brazil, Praia do Futuro is the city’s finest and most popular beach.

White sand stretches along the coast to the east toward South America’s biggest waterpark: Beach Park. Under a palm tree I’m sucking down coconut water straight from the shell. Give a local a machete and a straw and he’s in the fruit drinks business.

Looking out toward the white-capped waves that wash ashore, straw umbrellas rustle in the breeze as they provide shade for the Spanish, Italian and Brazilian tourists on the beach.

This stretch of beach is lined with beachfront bars, restaurants and clubs like this. They are all open to the public. In fact, we’re on public land. The owner has a concession to operate his business here.

Everywhere you look the crowds and activity tell you that tourism is booming. With over 3 million visitors, Fortaleza is Brazil’s #1 domestic tourism destination. Numbers are set to grow by 11% year on year into the future. This is where Brazil’s new (and old) middle class come to vacation. It’s also a popular spot with Europeans.

I was last here with a small group of Real Estate Trend Alert members. This tourism activity is good news for anyone who bought property here…but bad news for one member of our scouting party. He wanted to extend his trip but there was no room in our hotel. The two hotels nearby on the boardwalk were also full. I’ve found myself in this position on past visits.

There’s a shortage of hotel space in Fortaleza. If you are looking to rent a condo during peak season, forget about it unless you book 18 months in advance. Carnival 2012 is already heavily booked.

Fortaleza is a strong rental market…that’s not just driven by the tourist market.

The boardwalk area (Iracema, where I told you about yesterday, in particular) is where the rental market is strongest.

Owning a rental in Fortaleza you have multiple sources of renters. You have vacationers from many different countries…executives from companies here to set up and work in new offices…young professionals.

Aside from tourism, it’s a boom town. The boom is fuelling demand. And, there are hotel and short-term rental shortages. The hotels along Fortaleza’s boardwalk operate at close to full occupancy for much of the year. This area is pretty much built out. Future supply (your competition) has constraints. A government plan calls for visitor numbers to grow by 11% each year. That’s a big ask coming off a high base of 3 million visitors. But, with the massive spend on tourism amenities and infrastructure that’s due to happen, the target is achievable.

The future here is bright.

Praia Beach in Iracema is where you could generate the highest yields. By yields I mean the percentage of your investment you recoup in rent each year. This is the area where the extension of the boardwalk is going to create Fortaleza’s next chic promenade. It’s got everything the boardwalk has going for it. But, you can buy at a lower price than the current boardwalk sells for…50% less.

That means a higher yield…and also more scope for prices to rise. This is an area where I have invested. And I’ve recommended it to members of Real Estate Trend Alert. Thirty condo units in an Iracema development are available with special pricing, starting at $115,000.

Editor’s Note: Ronan McMahon is the Executive Director of Pathfinder (International Living’s preferred real estate advertising partner), which focuses on opportunity for gains in strategic pockets around the world-before most folks have even heard of them. He writes for Pathfinder’s real estate investment service, the Real Estate Trend Alert.

I’ll send members of Real Estate Trend Alert the full details today.