Real Estate Investment Funds (FII) are a pool of funds raised through the securities distribution system.
They are intended for investment in real estate projects or in private debt securities backed by real estate.
If you are looking to diversify your investment portfolio, it may be a good option. Here you will know the main advantages of investing in this modality.
How Real Estate Funds Work
Based on the same principle as investment funds, real estate funds are groups of investors who invest resources in real estate projects.
This can occur since the development of the projects or even properties already completed, such as shopping centers, hospitals and other commercial buildings.
The purpose of investment funds is to earn income through the exploration of leasing, leasing, sale of real estate and other activities in the sector.
Real estate funds are financial applications that work like a condominium. People collectively add resources to invest in financial securities. These securities represent real estate assets.
Current scenario of real estate funds
According to data from Votorantim Asset Management, the real estate funds sector is expanding.
In the period between December 2013 and December last year, the number of real estate funds on the stock exchange rose from 117 to 168.
In the same period, funds in general rose from 225 to 385. According to this survey, only real estate funds on the stock exchange have a value of R $ 50 billion.
Currently, the income tax exemption on capital gain has contributed greatly. Thanks to the exemption, the funds are now made up of 74.3% of individuals, 15.6% of the shares belong to the government, 9.1% to companies and only 1% to foreigners
Regarding real estate funds on the stock exchange, 55% are income and rent; 20% CRI funds; 22% hybrids (securities plus income) – and the remainder, development funds.
Main types of real estate funds
Despite being democratic, and a good option for those who are starting to invest, this market is still a little confusing.
There are many variations, a real estate fund can be fixed income, variable income or a combination of the two. We have separated the main modalities for you to be able to identify more easily.
Rental income funds
They are also known as brick funds, these real estate funds are less risky. This is because in this modality the source of income is most often taken for granted.
In income and rental funds, management companies buy real estate, mainly focused on commercial enterprises such as shopping malls and rent to other companies. Fund profitability occurs through rents that are distributed among shareholders.
In investments of this nature, the properties are leased by companies and aim at loyalty. Since the installation of a large company in a given property implies investments to adapt and standardize the environment.
Generally, the contracts are long-term and target medium and large companies, as they have higher income. These criteria promote greater security and, consequently, an adequate income stream.
Before investing, it is important to check that the fund has a good diversification of tenants. There is always the chance that some property will be empty and this compromises profitability.
Investment funds in real estate securities
These real estate funds are similar to those of fixed income funds. They invest in fixed income instruments, however, aimed at the real estate market.
The Real Estate Receivable Certificate (CRI), is a fund that helps to finance the real estate market, anticipating sector credits.
Here’s an example: when a construction company builds a condominium, it sells units that are still under construction. Instead of waiting for the client to settle, she resorts to securitization, which turns these debts into bonds. It is through these titles that you can make your applications.
The risk here is due to the default of those who are buying the property. One of the advantages of this fund is the exemption from income tax for individuals. When you acquire the title, you already know how much it can yield.
These funds invest in properties that are still under development, that is, they expect the entire process of maturation of the enterprise to obtain income. This implies greater risk.
Risks are common to any property under construction. Since a delay in the work that culminates in a delay in delivery, the property may not receive the habitation, obtain environmental licenses and many others.
On the other hand, we know the difference between the value of a property sold at the plant, for a finished property. This appreciation is expected in this type of fund. Despite the risks, the return can be much higher.
Considering these risks, a good part of the development funds offer a minimum income remuneration. This flow is called Minimum Guaranteed Income (RMG).
This remuneration helps to reduce the volatility of these funds, thus guaranteeing a certain predictability and return to its investors.
Buying and selling funds
For carrying out various transactions, this type of real estate fund is among the most risky.
It differs from other modalities because there is no clear instrument of profitability. There are several steps that consist of choosing a property with the potential for appreciation, buying it and then making a good sale.
The success of this type of fund depends a lot on the manager’s expertise. He needs to know the market and everything that influences property prices very well. It is necessary that he makes decisions that do not compromise the value of the property.
Many people prefer to outsource this type of investment, so it is possible to simplify and reduce the costs of all operations.
Funds of funds
As its name suggests, this real estate fund invests the largest share of its resources in shares of other funds. In other words, the fund manager selects others as if they were shares on the stock exchange.
This real estate fund can be interesting if you are just starting out and want to diversify your investments. Unfortunately, the fees involved in this process can greatly compromise profitability. If you already know a little about the market, there is no point in investing in this modality.
Is it worth investing in real estate funds?
Because it is democratic, real estate bonds have several benefits. They are accessible, allowing an ordinary person to participate in large properties such as a large hotel, for example.
It is a tax-free investment, however, the investor must have shares lower than 10% of the same fund. In addition, you can negotiate quotes directly with your home broker.
It is possible to find quotas for ridiculous amounts, less than R $ 5, however many require a minimum amount of quotas.
You can also diversify your portfolio, investing in various niches, such as hotels, commercial buildings, hospitals, stadiums, among others. Hardly, all these applications are at risk of falling at the same time.
And finally, real estate funds allow you to have a return on fixed income and variable income simultaneously. The fixed rate consists of the receipt of monthly or rental income from the shares, the variable is due to the appreciation of the shares.
Always consult a specialist when investing, he can help.