Investment Properties in Rio de Janeiro

By Nathan M. Walters, Contributing Reporter

RIO DE JANEIRO, BRAZIL – The Rio real estate market is soaring, fueled by a booming domestic economy, increased tourism, world sporting events and oil fever. Property values in Zona Sul (South Zone) have increased in value at incredible rates, and many predict the trend to continue, bringing more investors to the action.

Foreign investors are entering the Brazilian market in a number of different ways, and renovating residential properties for sale or rent continues to be one of the more common practices in Rio.

Both pure investors and residents, are taking on “fixer-upper” projects aided by more mega home improvement stores that can be found in Rio. For the aspiring DIYer (do it yourself), even Leroy Merlin, the French home-improvement chain, has locations throughout the city.

Owner-occupied renovations have been steadily increasing with the growing Brazilian middle-class. The investment property market, dilapidated apartments bought with the intention of renovating for resale or rental, has been exploding for the past five years, garnering investors healthy returns.

“Five years ago it was cherry picking, prices were low, the Brazilian real was weaker. If you had the funding and a good architect it was very interesting,” says James Lomas of Indigo, a real estate investment firm.

Lomas sees a strong seller’s market but is cautious about investing in renovation projects, “It is more difficult now. The prices in Zona Sul have skyrocketed. Owners are pushing prices up to test the market. That combined with volatile exchange rates makes for a riskier investment.”

Not all real estate investors share Lomas’ sentiments, Kasper M. Sonne, a Danish-trained architect and Real Estate Developer, views Rio as a “sea of opportunity.” Sonne, who has been involved in high-end renovation projects with Rio’s InTown Group, is optimistic about quality real estate development in Rio.

“Ipanema, Leblon, Copacabana, are difficult areas, but there are plenty of opportunities in other parts of the city. The closest adjacent city areas, to Ipanema, Copacabana, Leblon and the other coastline areas in the city still have great potential for investors, especially when targeting the middle-class,” states Sonne.

Sonne focuses on “safe, simple projects” for foreign investors. He has been studying the market for years and identifies obstacles but remains excited about the opportunities.

“Renovating properties with a good project-manager is one of the safest ways for foreign investors to get involved in Brazil,” mentions Sonne. “If you have a good network of contractors the process works much better. It takes a strong network to get renovation projects done in Rio.”

Lomas feels the same, “If you don’t take short-cuts the work can be done on time and within budget. If you choose to build carefully with good architects you save yourself a lot of hassle.”

The entrepreneurial spirit foreigners like Sonne and Lomas bring to the Rio real estate market is much needed. Sonne is passionate about his work as a project- and construction manager, “I think foreigners from a different construction tradition is great for Rio. The city benefits from quality renovation projects and I am happy to be involved in that, both for the people who live in the renovated properties as well as my investors.”