Has anyone invested in a Apartment project

Don't do it.

That reply is based on the long term regular posts of a RE broker here on this forum, and my own "boots on the ground" research, opinion, and first hand experience on the subject.

YMMV......

@NewBrazil I'm about ready to finish my payments and get my apartment at the end of the year.  I'm buying using a SCP (Sociedade em Conta de Participação) which basically is a joining a group of other investors, and paying a % to a company which manages construction, budgets, reports, etc.

What I did was have an attorney analyze the contract so I understood what I was signing, and then also doing my own due dilgence (making sure the property wasn't in an area prone to flooding, etc.).

Make sure whichever the company you are dealing with has some type of history and experience.

In my instance, the initial purchase price has been increased a few times over the last few years due to inflation.  I was well aware this would happen, and didn't mind it because I wanted quality materials and workmanship and I figured that over 3 years there would be inflation. 

Right across from my sister and brother inlaw's apartment, I also watched the 25 story luxury high rise in the middle of Barra de Tijuca, (Rio) one block from the beach, in the ABM complex, end up unfinished back in 2010 as the builder went bankrupt, and it took the initial owner's (like a mikehunter for example) about 10 more years to pay out of their own pockets for all the legal fees and to finish the building.

Caveat emptor as they say.......

@Gasparzinho 777 That's why a SCP is the better approach, IMO.  However, there are no guarantees in life.  That said, just because one builder has an issue doesn't mean ALL builders will have issues.  If that was the case, there would be no new apartment sales in Brasil, and we all know that is not the case.

If you do your due dilgence, you should be fine.

One additional information point... this is Brasil, so chances are the project will be late.  Mine was late by about a year.  Of course, COVID had some impact, but just set your expectations up front to expect delays.

Thanks to all for your help and responses. SCP is a Limited Partnership. Is that how all the buyer bought their Apartments or did you form your own. It was mention you paid it off.  The one I looking at they are offering payment over time after it built is this normal. There is a down payment to secure the Apartment and can you lock the price.

    Thanks to all for your help and responses. SCP is a Limited Partnership. Is that how all the buyer bought their Apartments or did you form your own. It was mention you paid it off.  The one I looking at they are offering payment over time after it built is this normal. There is a down payment to secure the Apartment and can you lock the price.

In my SCP, there is a company that manages the construction.  All buyers in the complex are investors in the partnership.  The computed purchase price includes the management fee to get the building built.  In my case, I receive a monthly report detailing status, expenditures, etc. 

My last payment will be October, 2024.  To enter the partnership, I paid a down payment and then a monthly fee for the remainder.  During building, there were 2 increases due to inflation and the construction time period was increased by 12 months.  My contract was not fixed price.  The partners were/are responsible for inflationary increases based upon the size of the unit purchased.  The funds to build the complex aren't coming from a bank or lender but rather the SCP and it's associated investors.

If you are paying AFTER the apartment is finished, then that doesn't appear to be an SCP, but rather a contractor getting a building loan from a bank and using it to construct the property.  Whether you lock in the price or not would depend on your particular purchase contract.

Here is a summary of what is a SCP:

The Participation Account Company (SCP) is the union of a group of people of a physical and / or legal nature that aims to carry out commercial operations together. In the case of THE MANAGEMENT COMPANY, the construction of a real estate development. For this goal to be realized, a group of investors are formed to guarantee all the investments necessary for the construction of a venture.​

In this scenario, THE MANAGEMENT COMPANY enters the SCP with the responsibility of carrying out all the management of the work: hiring of professionals, purchase of materials, administration of the group of investors, preparation of monthly reports that include from the financial movement to the information of the planned and executed services of the work.

FYI.......Several of SP Real Estate Broker's posts referred to the poor quality of new and recent builds. He specifically mentioned several of his new construction purchasers bringing levels and squares to inspect their property prior to final closing. Having been here on and off since 2000 and having transacted in 2 properties (and now looking for #3) and seen countless others, I've viewed the results of new construction quality first hand, especially since some builders have imported North American techniques, I wouldn't touch one with a ten foot pole myself. Not saying you'll have problems (and I hope you don't) because statistically speaking there are going to be success stories, it's just that what I do see often has convinced me of my position. Look at the Olympic construction and the soccer stadiums for the World Cup as just one glaring example of what I am talking about.

Condo apartments are not run here like they are in North America. and many gringos just do not get that aspect of RE investing in Brasil. There are no real rules regarding condo corps. Brasilians are loathe to pay a "cota extra" or higher condo fees in general, and the concept of reserve funds simply do not exist because of this. It is a common practice for condo owners to refuse to pay fees and then once they have finally been sued, to go to court years later and cut a deal for 40-50-60% of the owed amount. Be forewarned. is all I am saying. I can tell you stories.........like this one.......

My wife's aunt was the sindicato for a large luxury high rise in Rio. 12 months ago they had a water problem due to the original build specs finally failing due to design/cost issues. She totally redid the water system and for the last year everything is working better than it ever has. Problem is, they had to pay a cota extra (as there is no reserve fund at all in this 100 unit high rise) and this pissed a bunch of owner's off, so, they had a vote, removed her as the sindicato, installed some dude who does live on site, and guess what ? They are removing what she did and putting back in the old system because they are typical Brasilians.

Thank you mikehunter for your explanation of your SCP .

@NewBrazil Don’t do it. Big time risk.

@KenAquarius I believe a blanket "Don't Do It" is kind of harsh.  If you do your homework you should be fine.  You need to be aware whenever you buy real estate and get the professional assistance, whether it be new or used.  If you do, you should be fine.

@Gasparzinho 777 As far as people being loath to pay condo fees, that is not limited to Brasil.  It happens in the US also.  Look at the Condo failures in Florida for an example.  People not paying is also common.  We have several deadbeats not paying their monthly payments in the complex I'm current in.  There are all kinds of legal games they can play to keep from paying. 

Bottom line, you need to have a place to live, there advantages to renting and advantages to buying.  Different needs for different people. 

Regarding design cost issues, I believe that is less likely with a SCP.  The owners are paying to build the complex, not the management company or a bank loan.  The management company has no incentive to cut corners since costs aren't coming out of their pocket.  All a shoddy job would do is hurt their reputation going forward.

@mikehunter, @KenAquarius He's kind of a Harsh Guy, you'll get used to it. @NewBrazil, just take his advice and roll with it.

Roddie in Retirement

Mike.....

Howl long have you been traveling/living in Brasil ?

There is a saying here......."Brasil is not for amateurs".......

Everything is different here than what you and I think, and are used to. You are not in Kansas anymore Toto.

I'm on year 24 now and Ken has 20+ as well.

@Gasparzinho 777 My first visit in Brazil was in 2001.  I have plenty of Brasilian friends who have purchased property, both used and new and they have been fine.  If Brazil was such a hellhole I would not have gotten a residency.

@mikehunter My advice is simply my own opinion based on what l have seen and been told. 100% l would not invest in something that is not finished and could be properly inspected. In fact I was once advised by an old Brazilian developer to be careful buying a property that was even freshly remodeled and painted, because Brazilians don’t do such things unless they are hiding something. Not my words but his.

@KenAquarius No worries, and that is good advice.  I believe the bottom line is you have to make an informed decision and go from there.  I just didn't agree with a blanket "Don't do it".

@mikehunter No problem. This is why a forum like this is valuable. It gives insight from a variety of people and their knowledge.

My advice is directed to someone who knows nothing about Brazil and how things "work"......or don't.

08/14/24 Condo apartments are not run here like they are in North America. and many gringos just do not get that aspect of RE investing in Brasil. There are no real rules regarding condo corps. Brasilians are loathe to pay a "cota extra" or higher condo fees in general, and the concept of reserve funds simply do not exist because of this. It is a common practice for condo owners to refuse to pay fees and then once they have finally been sued, to go to court years later and cut a deal for 40-50-60% of the owed amount. Be forewarned. is all I am saying.

    -@Gasparzinho 777

There are workarounds available in Brazil to address these problems -- but they're not for the faint of heart.

We live in a vintage building that had had the same now very elderly Síndica for eighteen years.  The condominium assessment hadn't been raised for fifteen years, even for inflation.  The building was gradually deteriorating, past-dues with the utilities -- and labor law violations with the employees -- were accumulating, and we were living cota extra to cota extra.  We had a delinquency problem with non-payment of assessments and cotas extras, but the Síndica did not want to confront the deadbeats.  We got together with some other activist residents and at first tried to work with the Síndica to turn things around.  When it became clear that she was unwilling or unable to work with us in good faith, we pressured her not to seek re-election.

We replaced her with a professional Síndica, a person who manages our building and four others for a salary.  She brought a very competent team in with her, including a handyman to make minor repairs that were quick improvements that the residents could see.  We immediately doubled the assessment, with a promise to end the constant cotas extras as part of the need case.  On the new Síndica's recommendation, we sold our past due Receivables to a Garantidora, a type of finance company that provides this service.  Unfortunately, the former Síndica had allowed many older Receivables to expire by failing to initiate collection actions, but the sale of the Receivables that were still valid provided a much needed influx of working capital.  All of our deadbeats are now in legal collection.  They hate it; I love it!  We also hired the Garantidora to bill our assessment, and now each month we receive the entire billed amount, less the Garantidora's fee.  If anyone doesn't pay, that's no longer a burden for the condominium:  they go directly to the Garantidora's collections system.

There's enough money in the till to start addressing the worst of the deferred maintenance issues.  The labor law violations have been addressed, and the fines are on a payment schedule that is being met; same thing for the utilities arrears.  The employees are happy:  they have their uniforms and their legally required allowances again, abusive residents (who, interestingly, more often than not were deadbeat residents, as well) are dealt with swiftly by management, and most importantly, they all have their Labor Cards signed and are receiving their salaries, on time and in full, every month. 

Our condominium declaration only permits residents who are up to date on their assessment to vote, so the deadbeats can complain (and do, loudly!) but they can't vote the new regime out unless they pay up.  Getting it done required a lot more confrontation than most Brazilians are comfortable with, and it all could still be reversed, although that would be difficult.  There's still a long way to go, and we're not out of the woods yet -- but now we can definitely see light through the trees.

@abthree Thanks for posting.  The "if you don't pay, you can't vote" is a great idea.  I keep thinking of the Champlain Towers fiasco in Florida, and the fallout (no pun intended) regarding the reckoning that is coming for Florida's condo owners as buildings face millions in repairs.  You've got to pay to keep homes and buildings in good repair.  That's just the reality of the situation. 

I believe that it is actually a legal requirement to include a clause in the Condominium Convention, to the effect that owners who are behind with monthly dues can neither participate nor vote in meetings, until they are up to date with payments.

We bought a new apartment from a plan (na planta)  in a large complex built by one of the country's largest builders, with a decent reputation. This was 15 years ago, and we have had no serious problems with our unit since moving in. It was delivered almost two years late, so we launched a legal action and were awarded (and received) almost R$300,000 for the delay. It took a decade to get that settlement. Fortunately we didn't sell our previous home before we moved, so aside from stress this didn't cause any great difficulty .

Both I and and my wife have served on the condominium  fiscal and administrative councils several times, and are active in condo affairs, so we are well aware of the administrative challenges of a large condo (this one has 18 towers and more than 4,000 residents). Residents ousted the first síndico After two years, which was really a property management company installed by the builder. We have since gone though three other individual síndicos before the current one, who is a professional síndico, largely liked  and competent. He is supported by a large administrative team. We do have a large reserve fund but have had to levy several temporary extra fees (cotas) for costly problems caused by builder inadequacies, such as rebuilding tower roofs because of rainwater infiltration into top-floor apartments and swimming pool leaks caused by initial construction deficiencies (we have ongoing lawsuits against the builder related to these and several other issues.). The percentage of condo owners here who are behind in paying condo fees is about 6% at the moment, which I believe is below the national average. It was higher during peak Covid. We aggressively pursue those people through negotiation and legal action if necessary. Nobody who is in arrears can  attend condo meetings or vote in condo affairs.

This is obviously a large condo with complex management needs. It contains a many leisure facilities, including a large gym facility, soccer field, tennis courts, many swimming pools, squash courts, volleyball courts, a restaurant and several other amenities. Security (large front gate operation and internal security) and maintenance cost millions of reais a year, and the total budget here is huge. But, by and large, it works.

Infighting among residents is a major issue, because--like politics--everybody thinks he or she is right. Residents ignoring condominium rules is another major issue because this is Brasil.

Would I do this again? Sure, but only with a reputable builder. The builder of this complex is still around, and still building condos. I would never buy a top-floor (cobertura) apartment and I would always have a sales contract carefully vetted by a lawyer, as we did. I would also expect extra fees from time to time, which are common in most condos. We also own rental condo apartments, and extra fees happen there as well.

As is the case with every purchase, it pays to do your homework first. Also, be aware that the money you owe after the downpayment, and the monthly payments you make before taking possession, will increase by the amount of the official inflation rate. This is a major problem when inflation is high (which it isn't, by Brazilian standards, at the moment).

@jonesio Good information.  Thank you very much for taking the time to post.

Another story.

Our condo in Copa with 40 units found out in 2018 that the company we used absconded with R$200K of our money and that of several others. The cops did northing but took a report.

We had a meeting and a trusted member everyone knew became our sindicato.

When I renovated two apartments I bought the paint and other supplies myself, negotiated EVERYTHING, was onsite daily, etc, etc......when you hire someone and they give you statements, how do you know you're not Enron 2.0 ?

People need to understand the reality here.

Thank you all for your responses. I have a couple question or suggerstions. Is there any way to put a list of know relatable Contractor who have built or are building condo or Apartment  projects. How about a list of good management companies. What is your experience or recommendations how old a condo or Apartments you shouldn’t buy. Iast I am looking for a condo or  apartment in Fortaleza what is anyone experence owning there and who would you recommend as a realtor to help find a place. If you know a reliable Apartment  in a good part of Fortaleza for sale. Would like to be near the beach aera.

@NewBrazil What I did was search for apartments for sale in the desired area.  I found the apartment I liked and searched on the specific area, check to see if it was in a flood plain, etc.  After that, I researched on other projects the contractor had managed.  It's amazing how much information you can gather with a good web search engine.  For new projects I prefer the SCP for reasons I've stated earlier.  Everyone is going to give you different advice depending on their preferences and bias, which more than likely are different from your own.  You need to get in there and do the research yourself and before you pull the trigger get an attorney to review the contract.

It is also important to remember the 5% rule. Brazilian constructors are allowed a margin of error of up to 5%...!

So stories of people bringing set squares and levels and refusing purchases if they are not exact are probably somewhat exaggerated, but a tape to verify measurements (or more likely, to check if furniture, etc, will fit), is more believable... And it is a good idea to verify if your shower does indeed slope down towards the drain, not away from it...!