Rental Property in Brazil: Increasing rental returns for Brazilian property investors

The year 2010 was a decent year for Brazilian Home's investor clients who purchased a property with the intention of renting out the property while not using it.

Majority of our clients purchased an apartment in our flagship Pipa property development #1056, and the development has been going from strength to strength ever since completed 2 1/2 years ago. The months of December 2010, January and February 2011 became fully booked already several months prior as most clients reserved well in advance. The occupation rates for these three months lies at 95% with only a few gaps in between client arrivals. The rental rates for 2010 have been very low in order to build the client base. For 2011, we already have a decent amount of referral bookings as well as many clients who are coming back again for year 2011 for a second time.

The trend for 2010 was very much that the Brazilian domestic rental market stood for over 60% of all rental bookings with the foreign market taking up the remaining 40%. We are forecasting a slowly recovering European travel demand, but given Brazil's fast growth, we forecast the Brazilian domestic demand to be the main driver well into the future.

The pricing policy for our Pipa rental rates has proven to be a well working concept. #1056 is one of the few property developments where clients get significant discounts along with a longer stay in the property. For 2011, the rental rates will most likely remain very competitive in order to keep on growing the client base, but from 2012 onwards, the rental rates will increase which will push up rental returns significantly for our investor clients.

Net rental returns for 2010 after all expenses have come out at approx. 5% with some minor differences between the property types. We forecast net rental returns of between 6-8% starting from year 2013, and after the World Cup 2014 and Olympic games in 2016, the net rental returns are forecast to move beyond 10%. In addition to the rental ROI, investors will also benefit from capital gain ( apartment value increase ) when they decide to resell their Brazilian property in the future.

Investors are advised to get on the ladder during 2011 as the current low purchase prices offer the best long-term investment potential. Coming off-plan property developments in Brazil will be more expensive as land prices along with increasing build costs mean that sales prices will be higher than already built Brazilian properties.

To see development #1056 as well as other great investment opportunities, please see our Brazil property for sale section. To see a few very good rental properties in Brazil, please see our Property rentals in Brazil section