A Couple "Musts" and "MustNots" When Investing In Brazil

[Golfingworld]

Mr Broad, I note you didn't object to the fundamental comments I have made, banks, flights, rentals, airport etc etc. The bridge makes little or no difference in my view, certainly at present until the alleged new road is in place. I certainly do know what due diligence is I and yes I did my homework as to the legalities. I know the difference between Escritura Privada and Publica. I have a good Brasilian guy who knows his stuff and oddly he agrees with me about the bridge, airport and flights. My constructor has been in Brazil for 10 years and we have seen his other projects, my man has checked him out. I have stood on his roof and watch his electricians at work, not a computer generated image that might have a Licence delayed. A number of other members of this site have also witnessed the same! Jacumi is nothing more than a beach village for fishermen, not a millionaires villa in site. And I could n't find another development between Jacuma and the Norwegians near Pittitinga and I went looking for five days. I am a "speculative" investor checking out the market and apart from Jacuma nobody had a sign up and I looked hard. Fortunately I found a friendly Brazilian with a buggy who drove me up the beach to find some developments, including a privately owned walled Arab owned complex. So if you go into a shop to buy a can of beer and one is hidden behind the counter and one is on top, which one you going to buy? All I can say is that I went looking to find out what was there and drove up more dirt tracks than Ewan McGregor in Africa and still only found 2 or 3...maybe I should have taken my laptop with me and surfed the net for the real explosive development plans!

[JMBroad]

Originally Posted by Golfingworld

Mr Broad, I note you didn't object to the fundamental comments I have made, banks, flights, rentals, airport etc etc. The bridge makes little or no difference in my view, certainly at present until the alleged new road is in place. I certainly do know what due diligence is I and yes I did my homework as to the legalities. I know the difference between Escritura Privada and Publica. I have a good Brasilian guy who knows his stuff and oddly he agrees with me about the bridge, airport and flights. My constructor has been in Brazil for 10 years and we have seen his other projects, my man has checked him out. I have stood on his roof and watch his electricians at work, not a computer generated image that might have a Licence delayed. A number of other members of this site have also witnessed the same! Jacumi is nothing more than a beach village for fishermen, not a millionaires villa in site. And I could n't find another development between Jacuma and the Norwegians near Pittitinga and I went looking for five days. I am a "speculative" investor checking out the market and apart from Jacuma nobody had a sign up and I looked hard. Fortunately I found a friendly Brazilian with a buggy who drove me up the beach to find some developments, including a privately owned walled Arab owned complex. So if you go into a shop to buy a can of beer and one is hidden behind the counter and one is on top, which one you going to buy? All I can say is that I went looking to find out what was there and drove up more dirt tracks than Ewan McGregor in Africa and still only found 2 or 3...maybe I should have taken my laptop with me and surfed the net for the real explosive development plans!

As I said, you do bring important topics to the table which may have been overlooked by investors, which is great. Why would I say that you are making false claims about things when you aren't? However what I said still remains true. Everything you say is not gospel and should be carefully screened. Because on some things you are right but on many you are wrong. We have different views about the current airport and the new airport - only time will tell which one of us (if either of us) is right. I respect your opinions but don't agree with them.

Due Diligence:
What legal documents should investors examine to ensure that their purchase is ok? I've stood on many a roof of many an illegal building in many different countries and looked down upon the illegally employed electricians installing the illegal wiring into the illegal walls. And the developer has shown me other legal and illegal developments they have built in the past. You only realise it's not legal when you move in and find that the water and electricity aren't connected to the mains. Hopefully that won't happen to your purchase or anyone else's, but if the Due Diligence isn't done, it could happen.

As you know, I've been to Natal region once for a week. I stood on more than 6 developments under construction in the same area you found 1. Why? Because part of the costs involved in building a development include marketing and in 99% of the cases, marketing for developers means hiring reputable agencies to sell the development for them. Developers (especially in Brasil) don't always speak other languages, aren't marketing specialists, don't want the hassle of dealing with individual buyers so they employ professionals to do that for them. Hence why it is easier for agents to get information about what is being built and where rather than individuals. Apart from us looking for the new developments, the developers invite us as well. For the same reason, they don't always plaster big signs everywhere pointing to the building sites. Only three of them were accessed by "dirt tracks" - the rest had tarmac leading up to the edge of the development. (including Jacuma - the dirt track leads to the sales office, the entrance of Jacuma is on the tarmac road before the sales office)

Regarding Jacuma, read my answer to your post about it and look at the photos I took. I don't know what your definition of a "villa" is but those three quite large houses on the beach with private pools and manicured gardens fit my definition of a "villa".

http://www.propertycommunity.com/forum/brazi...-market-4.html

Either way, my advice is simply to take all the information received here for what it is. A forum with "advice" given by people who may or may not have a clue of what they are talking about. Seek opinions but use your own common sense and business acumen to filter the information you are given. And check everything, no matter who it comes from.

[Golfingworld]

And my advice to potential buyers is as stated, "roll your sleeves up", go there and look for yourself as much as possible, take your time and don't do it from an armchair in western europe looking at a flat screen. Find a local man, preferably a brasillian and a gringo who lives and works there and ask as many questions as you can from whoever you can. Due Diligence really means the above and not the cliche, it means learn absolutely everything possible that you can locally and on site, evaluate it, get a feel, taste and smell and then make a judgement. To my mind "do due diligence" means nothing at all and that is why I posted my "what is due diligence" thread so the uninformed understand the mechanics and not the cliche. All part of the lurning curve. Agents based in Western Europe who are selling in Brazil clearly have an agenda. Of course they want to steer customers in their direction I just think that with property it makes sense to "go local" and there are a number of Gringos and Brasilians who are on site, on territory who fulfil this requirement. If the Europeans want to compete with this there is a simple answer, put their own Gringo there and compete with the local experts. It is known as a free economy!

I posted a response to you recently which dispelled the many myths which are claimed about transportation to NE Brazil, you didn't comment. There are hundreds of pages on the net all claiming that Brazil is easy and cheap to get to and quoting flights that don't exist or have been stopped. if your industry is so keen to convince Europeans that you have a superior knowledge to those who are based locally, then start by getting your house in order and quote the real situation with regard to NE Brazil, particularly Natal. Why is it not possible to say "at present it is a difficult and expensive place to get to from Western Europe, most flights are charters which are restriced and seasonal and the only real carrier with any network is with TAP trough Lisbon....but..there are the reasons why we feel this will change". If I was told that or read it Imight think, fair enough..they are being upfront and I'll talk to them.....as I have said before...it is not rocket science. In the meantime the locals and Gringos on territory rule the roost and good on them, they are actually on the ground living it and imparting this to their clients!

[robh]

GW,

Out of curiosity what do you consider a good priced fare from the UK to Natal?

Of course taking into account that you are flying about 7,500 kilometres and need to be fed twice each way.

Rob.

[mitico67]

Originally Posted by robh

GW,

Out of curiosity what do you consider a good priced fare from the UK to Natal?

Of course taking into account that you are flying about 7,500 kilometres and need to be fed twice each way.

Rob.

I think it should be rephrased on ...what a holiday maker would consider a good price taking into account that he should pay me a decent rent to justfy my investment(when I finally will buy an apt) compared to what he could get if he chose the all inclusive holiday

[JMBroad]

Originally Posted by Golfingworld

And my advice to potential buyers is as stated, "roll your sleeves up", go there and look for yourself as much as possible, take your time and don't do it from an armchair in western europe looking at a flat screen. Find a local man, preferably a brasillian and a gringo who lives and works there and ask as many questions as you can from whoever you can. Due Diligence really means the above and not the cliche, it means learn absolutely everything possible that you can locally and on site, evaluate it, get a feel, taste and smell and then make a judgement. To my mind "do due diligence" means nothing at all and that is why I posted my "what is due diligence" thread so the uninformed understand the mechanics and not the cliche. All part of the lurning curve. Agents based in Western Europe who are selling in Brazil clearly have an agenda. Of course they want to steer customers in their direction I just think that with property it makes sense to "go local" and there are a number of Gringos and Brasilians who are on site, on territory who fulfil this requirement. If the Europeans want to compete with this there is a simple answer, put their own Gringo there and compete with the local experts. It is known as a free economy!

Couldn't agree more (shock horror, we are agreeing!). I was just pointing out to Mitico that the "challenge everything" applies to everyone on the forums and beyond.

With regards to Due Diligence though, I can't stress how important and "non-trivial" it is. It is without doubt the single most important part of the purchasing process. Your post regarding DD, while it had the best of intentions, didn't even come close to answering the question "what is due diligence".

The reason people won't just offer up the details on the forum is that those who do carry out DD invested time, effort and money to find out the detailed steps of the process to make sure the investments they offer their clients are as safe as possible. DD is about making sure the risks of your investment are as small as possible, not how much money you might or might not make but being sure clients don't lose their initial investment altogether.

While projected returns on investments always involve some sort of educated guesswork (what will the market do, what will the economy do, will you be able to sell, who will you sell to, etc) DD is pure facts. Either it's legal or it's not, either you will have a property at the end of the day which you can sell or you won't.

[JMBroad]

Originally Posted by Golfingworld

I posted a response to you recently which dispelled the many myths which are claimed about transportation to NE Brazil, you didn't comment. (...)Why is it not possible to say "at present it is a difficult and expensive place to get to from Western Europe, most flights are charters which are restriced and seasonal and the only real carrier with any network is with TAP trough Lisbon....but..there are the reasons why we feel this will change".

The reason I didn't comment is because we have been having this discussion for months. I've done exactly that numerous times, I've said exactly what you want to hear but I seriously believe you don't read my posts, you read what you want from them. So I gave up repeating myself over and over again.

[robh]

Originally Posted by mitico67

I think it should be rephrased on ...what a holiday maker would consider a good price taking into account that he should pay me a decent rent to justfy my investment(when I finally will buy an apt) compared to what he could get if he chose the all inclusive holiday

Mitico,

I understand what you are saying, but I already know what the historical and current rental figures are in the the areas we sell, in fact I just published some historical figures on here that we got from a major Brazilian developer for a very large development 2 weeks ago.

So what I am trying to gauge is what is a good price for an airfare alone, is it £200 or £500, taking into account the distances involved and that the airline needs to make a profit to make the route viable?

Regards,
Rob.

[Golfingworld]

Right first thngs first Airline pricing;to really get that market going, people need to get there for less than £500 or the Euro equivalent all the year round. They don't need to be locked into unchangeable tickets and they need to be able to buy (legally) a one way ticket out of Brasil at a reasonable price. The holday ownership/rental market only works because consumers have flexibility, ease of transport and good value as and when. Markets do not boom where you have to add 6 hours onto your round trip via Rio/SP or Lisbon. If a family of four want to rent and their airtravel excess £1500/2000 then pure economics state it is more viable to go "all inclusive" or "package/pacote" as they get added benefits which would cost them a lot more for a private rental. Owners want to spend longer periods there, so the standard charter, albeit cheap when demand is down will not sell you a 4/6/8 week ticket, all this removes market and consumer flexibility and supresses demand. This currently leaves owners with TAP or the trek via Rio which is ludicrous. To give you an example, lets assume Morocco is now booming and you told all your customers that there are easy cheap and reliable flights from the UK to Fez via Dakar or Abidjan..you'd be laughed out of court! This is what people are being told for Brazil. So until such time as the flight issues are addressed, everything else is pure speculation. If you want to see how it is really done, The UAE have turned an overheated dust bowl into the world's most advancing mega destination and hub in less than 15 years..how....by using their head and getting the airline, pricing and airport in place first and then publicising and marketing it properly..they didn't sit there and say "all the infrastructure will come" they made it come! There are millions of people in South America and likewise in Europe that all want to go to eachother's continent and they all have to pass over a 1000km stretch between Fortaleza and Recife to get anywhere. If and when Natal's new airport happens and the airlines are allowed to grasp the concept of a similar hub as to that of Dubai from NW to SE..then..you can all start counting your pennies...but to promise it, assume it, hope for it or claim it, is somewhat premature until the transportation industry starts doing it. Howdo you get the transport industry to do it..you lobby..you are going to have to lobby because the Brasilian Govt won't do it for you! The alternative is you sell your plots, put the money in the bank and leave your customers with the problem..and in my view that will happen for a long time to come...look at South Africa if you want to see a pattern.

[JMBroad]

Originally Posted by Golfingworld

Right first thngs first Airline pricing;to really get that market going, people need to get there for less than £500 or the Euro equivalent all the year round. They don't need to be locked into unchangeable tickets and they need to be able to buy (legally) a one way ticket out of Brasil at a reasonable price. The holday ownership/rental market only works because consumers have flexibility, ease of transport and good value as and when. Markets do not boom where you have to add 6 hours onto your round trip via Rio/SP or Lisbon. If a family of four want to rent and their airtravel excess £1500/2000 then pure economics state it is more viable to go "all inclusive" or "package/pacote" as they get added benefits which would cost them a lot more for a private rental. Owners want to spend longer periods there, so the standard charter, albeit cheap when demand is down will not sell you a 4/6/8 week ticket, all this removes market and consumer flexibility and supresses demand. This currently leaves owners with TAP or the trek via Rio which is ludicrous. To give you an example, lets assume Morocco is now booming and you told all your customers that there are easy cheap and reliable flights from the UK to Fez via Dakar or Abidjan..you'd be laughed out of court! This is what people are being told for Brazil. So until such time as the flight issues are addressed, everything else is pure speculation. If you want to see how it is really done, The UAE have turned an overheated dust bowl into the world's most advancing mega destination and hub in less than 15 years..how....by using their head and getting the airline, pricing and airport in place first and then publicising and marketing it properly..they didn't sit there and say "all the infrastructure will come" they made it come! There are millions of people in South America and likewise in Europe that all want to go to eachother's continent and they all have to pass over a 1000km stretch between Fortaleza and Recife to get anywhere. If and when Natal's new airport happens and the airlines are allowed to grasp the concept of a similar hub as to that of Dubai from NW to SE..then..you can all start counting your pennies...but to promise it, assume it, hope for it or claim it, is somewhat premature until the transportation industry starts doing it. Howdo you get the transport industry to do it..you lobby..you are going to have to lobby because the Brasilian Govt won't do it for you! The alternative is you sell your plots, put the money in the bank and leave your customers with the problem..and in my view that will happen for a long time to come...look at South Africa if you want to see a pattern.

I believe they are working on the airport and it will be a working reality within the next 4-5 years because (to point out one small reason which I'm not bored of repeating yet) the capacity of the current airport already can't cope. For all the other reasons why I believe it, dig through the "Flight" thread - just about all of my posts there gives reasons why I believe it.

I understand what you are saying about South Africa but with all due respect to the country which I'm sure is lovely, I have 0 interest of going there whereas Brazil holds a lot of appeal for me personally. Perhaps because I grew up surrounded by South African and Brazilian families who influenced me. Both were fantastic people, but the folks from SA told me so many nightmares about what was happening that I'm still a bit traumatised.