One of the things I have noticed is that a process to do something in Brazil seems to vary locally. There may be laws or rules that set out certain conditions that must be fulfilled at a high level (read national or state), but at a local level there is variation. I mention this as a preface, so that what I have experienced to date in purchasing property in Brazil is not taken as gospel, but as one individual’s experience which may smooth any future real estate purchases made by readers of this blog.

A little background to begin. I and the family were residing in the U.S. My wife is Brazilian, and our intention was always to return to Brazil when I considered retirement (that kind of hints at my age, doesn’t it? Although I understand Steve managed it quite a bit earlier once upon a time, but that is for him to relate if he so chooses.) My wife was fortunate in being able to take leave without pay from her employment and an extended sabbatical from her studies. We set a return to Brazil date of Christmas, 2007. We decided to ship most of the household goods to Brazil, but we realized that the apartment the wife owned here in Vitória was not of sufficient size to contain everything, so, that precipitated the decision to purchase a larger apartment. Note that an apartment here is bought, like a condominium in the U.S. They can also be rented.

In early 2007 we started looking on the internet at various apartment properties. We looked at both used and under construction and soon to be built properties. Most locations were in Vitória, but we also looked at surrounding areas for comparisons in various factors, such as overall size, price, distance to commute, floor plan, number of bedrooms and suites, etc. One thing that struck me about the floor plans was that to me the traditional Brazilian apartment has a relatively small sala (living room), often just large enough to have a sofa and a TV. This was different for me, having come from a 4 bedroom colonial style house in the U.S. that was over 2500 square feet (232 square meters) and had both a living room and family room. Thus, in our search, I was always focusing (perhaps obsessing?) on the size of the sala more so than any other aspect. This isn’t to say other aspects did not factor into the decision, as they did, just that any floor plan with a substantial sala already had a leg up in my book.

We looked at a lot of properties online, and in the course of some visits to Vitória, we even went and looked at some models. Finally we came across one that had a large sala in proportion to the rest of the apartment. This was achieved in one of the floor plan variations by converting a 4^th bedroom into part of the sala. The remaining part of the 4^th bedroom became a walk in closet for the master bedroom, another feature we liked. There were other positives, such as the location being closer to the wife’s work place, having 3 suites, so we would have an extra suite for family and friends that visit, and other things. We “pulled the trigger” and decide to buy an apartment in this complex.

Room with a view

Here is where things get interesting and how the process differs from what I was used to in the U.S. When we made the decision to buy, the complex was not even under construction. Generally, at least here in Vitória, the firms that construct the high-rise apartment buildings pre-sell most of the units before actually beginning construction. The announced date for this initial sale for our apartment complex of choice was in June of 2007, before we were scheduled to return to Brazil. Thus we ended up obtaining a power of attorney to enable my wife’s sister to act in our behalf to make the purchase which she successfully completed.

Now, Brazil only recently made changes to some of its banking and financial laws to allow mortgages to be obtained that are somewhat similar to those in the U.S., but not exactly. The traditional way of making a purchase is to finance through the builder. This is why the builder likes to pre-sell most of the units before beginning construction. We went with the traditional method of financing and agreed upon a payment plan whose precise details I won’t bore you with. This payment schedule was fine, and while a substantial amount is paid up front prior to getting the key to the apartment (May 2010 by the way) the entire amount would be paid off in a much shorter time frame that a typical U.S. mortgage, even a 15 year one. The surprise came a bit later.

In the U.S. the regular conventional mortgage is set for the life of the mortgage based on the amortization schedule for the principle and interest. The monthly payment only varies if an adjustment needs to be made in the escrow funds that cover taxes and insurance. When making the purchase here in Brazil, I did not know, and did not realize until later, that the payment schedule set up would be pegged to a construction index. Thus, what I thought were going to be more or less stable payments have slowly crept upwards over time. And that construction index never goes down (inflation don’t you know). I’m still unsure at this point what happens once we receive the key. I believe the construction index will no longer be a factor, but I have yet to verify that. So, anyone who purchases property in the manner I have described, and you aren’t paying cash up front, be aware of the construction index factor.

You may ask, “Why purchase something before it has been built?” Some people will invest in new construction with the express intent of selling the unit once it is completed. This is because the builder discounts the cost of the units pre-construction. We have been told by sales people that the price of units in the complex have already escalated by 40 percent, and are likely to be even higher by the completion date. By purchasing at the initial sale date, we were better able to choose a location within the complex that we preferred.

There are essentially two different types of high-rise construction companies. They can be referred to as the “Big Boys” and the “Little Guys”. When buying property that is being built by the little guy, the possibility of making changes here and there, such as relocating a wall or moving a doorway, are more likely to be accommodated. With the larger outfits, you pretty much get what they build; any changes you want to make would have to be done later at additional and likely higher cost. Our new apartment is being built by the big boys. Offsetting an unwillingness to make changes is the fact that quite a few amenities are provided, which often are lacking, or of a lesser amount, in construction done by the smaller firms. The smaller firms generally limit the height of the building to 7 or 8 floors while the larger firms can go upwards of 30 floors.

Another item needed to purchase property in Brazil is a CPF Number. It is the Brazilian tax payer card. One does not have to be a resident of Brazil to obtain a CPF Number. I had this number long before even starting the process to become a permanent resident (another tale). But be aware of any tax requirements. If you have a CPF Number, and you purchase property in Brazil, but are not a resident, you still must declare that you made the purchase, even though there is no tax applied. At least that is my understanding. When I went to the Receita Federal to actually get the card in place of the the temporary paper with the CPF number, they were aware of the fact that I had not made the declaration as required. Got that straightened out and now have the CPF card.

Looking forward to May 2010.

Fred