Minha Casa Minha Vida; Building affordable homes in N.E Brazil 2015
Process,profits and pitfalls explained
I am the administrator and partner for 2 brazilian companies here in Natal/RN that were formed in 2013.
Our respective companies have 9 foreign investors from Europe and Australia.My job is to find realestate opportunities in the local brazilian market and apply our capital.This year we embarked on our first house building projects in a town just outside of Natal(the capital of Rio Grande do Norte,in the North-East of brazil)
We purchased an area comprising of 53 residential plots,4kms from the town center,installed the power lines,water supply and road and contracted a local builder to start the construction of 5 homes in January last year.
The homes consist of 2 bedrooms,bathroom,open planned kitchen/living area with front/back yard(200m2 landplot)Click on these 2 links to see a short walk through video of one of our Minha Casa Minha Vida homes plus drone imagery from above;
https://www.youtube.com/watch?v=lqoQkCVQ9DY
https://www.youtube.com/watch?v=2IfslUV6mfY
These first 5 homes were built in 4 months and found first-time brazilian buyers in a matter of 2-3 weeks through a network of local agents.The families moving in come mostly from rental accomodation in the poorer sections of Natal city.
The 1rst sales cycle from planning permission/house build/selling/processing the paperwork through the national bank was completed last month and so took 8 months.We have since started(in May 2014)2 new batches of homes,a total of 36(50%sold 2 months into construction) The returns work out at around 25,000reals/40% per home after all taxes/paperwork and commission is paid.
The benefits of the this type of investment are compounded by the speed of the sales process.You can basically build any number of homes,sell,receive funds and re-invest to double your number within a year.The process is the same,the profits multiply.This systematic process and profit margin is predicated on several very importantant factors;
-)Ability to buy cheap land.That’s where the profit lies as construction prices per m2 are fairly stable.
-)Need for a good construction company to develop your homes
-)Need for a competent dispatcher to facilitate the necessary paperwork for local government.
-)Good relations with bank personel to facilitate the payments.
I know other investors,both brazilian and foreign who have bought land at a price that squeezes the bottom line,others that have had to dispense with their building contrators during construction and others who have had major problems with getting funds released from the bank due to lack of paperwork,building irregularities etc
I am very happy to say that we have not experienced any of these types of difficulties so far.The most suprising thing has been the level of demand..the homes we sell are slightly below our competitors at 85,000reals.They have sold with ease.The buyers receive a brand new home with a nice little garden and reliable utility services at a subsidised price(20% granted by the government) and pay off their mortgage over a 35 year period at preferencial interest rates. We as the developer,generate employment for 30 brazilian construction workers,provide a good quality home for a family in need and bank a 40% profit.
Our company have made other investments in landbanking and we bought a large piece of land on the beachfront for a gated community so we have diversified our portfollio for any/all eventualities.
However I have to say that the Minha Casa Minha Vida program has been a major success here(in this region)in both addressing the housing shortage for low-income families and allowing companies such as ours to benefit in making it happen.
Since writing this article we have purchased a large area of land in the same town of Extremoz and we are in the process of licensing a project for 248 homes(you can see video presentation of this project on the video links below)We aim to build a minimum of 100 homes in 2015;
https://www.youtube.com/watch?v=_NbiJWJJSPM
Please feel free to contact me about any aspects of this investment.I would also be interested to hear about your experiences as fellow foreign developers/investors in this field.
To read more on the subject of land investment and property development in Brazil,please click on the following link and download my best-selling book,published on Amazon; http://www.amazon.com/Essential-Guide-Investment-Brazil-Beyond-ebook/dp/B00QPFSVYG/ref=asap_B00QQBFX8G?ie=UTF8
Mike Smith;Brazilian resident and property investor living in Natal/N.E Brazil
Mike Smith
BRAZIL ǀ Real Estate Investment Consultant/
Consultor de Investimento Imobiliário
Cel: +55 (84) 9993-8936
Office: +55(84) 3345-4406
Email: mikesmithbrazil@gmail
Skype ID: mikebrazilbeachhouse
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