That’s right. I had two condos (“apartamentos” in Brazil).
One is our primary residence and the other was actually the first property we bought here. Long story short, we didn’t use it much.
We have friends in the same area with many properties, so any time we’d go visit the area we just stayed with them. As such, it was time to consolidate.
Ok, so we bought the property in 2018. At the time the exchange rate was about 4:1 (BRL to USD). Now it’s 5:1, for context.
We also short-term rented the property to vacationers.
Here is the summary:
Over a 5 year holding period we made a bit over 14% per year, not counting the rents.
If you add in the rents and take out the carrying cost of the property (condo fees, utilities etc.) we got 15.5% return annualized.
Stated differently we got just over a 90% increase over our cost basis not counting rents and not deducting taxes and agent commissions. If you add in the rental profits (rents – carry costs) then we got 106% total return, before deducting taxes and transaction costs (seller agent commission).
In rents the property yielded an average of just over 3% annually. My experience is the annual yields on rental real estate is pretty low in Brazil, at least in the area I’m in. This is further confirmed by discussions with other short and long term landlords we know. That said, the appreciation was obviously very good.
So we listed the property with 3 real estate agents. It is not uncommon to use multiple agents, and unlike the US, agents do not require exclusivity here.
However, similar to the US, the buyer bears the closing costs and the seller pays out the real estate commission to the buyers/sellers agents. Agents here ask for 6% commission for a urban property and 10% for a rural property. The split is negotiated between the buyers and sellers agents.
In Brazil, it is not unusual for buyers to want to pay for the property in a way that may seem unusual for a US buyer. It is not uncommon for one of the following scenarios to unfold
- The buyer offers full price, or close to it, however they want to trade something for part of the value of the property. I have seen people trade other real estate, cars, and boats.
- The buyer offers full price, but wants seller financing for up to 5 years.
- The buyer offers cash and wants a discount off the asking price.
Any of those scenarios can also involve bank financing. Bank financing is more valuable than trades, as far as asking for a discount off the asking price, but less valuable than cash.
I personally have only had experience making and accepting cash offers. With the two properties I bought I get a 20% discount off the asking price for cash offers. Wit this sale, I accepted a cash offer which represented an 18.3% discount from our asking price.
Taxes: capital gains from real estate sales are taxed at 15% in Brazil. If you reinvest the proceeds into another property within 6 months no tax is owed on the gains.
So, that’s it for now. If you’re thinking of buying or selling, I hope this info serves you well.
-Sirsandals