Find out what property funds are and why investing in the property market is one of the best ways to get started in the investment market.
Over the years, we've always heard that investing in the property market is a good idea (and indeed, it is). However, we also know that in order to invest in property, we need to have a large amount of capital available for investment in this type of segment, as well as other bureaucracy involved in the process of buying (or building) a property - which ends up becoming a barrier to entry for investors with little capital.
Do you want to invest in the property market but don't have enough money to buy a property? Then this article will be of interest to you, as we'll explain how investing in Real Estate Funds (FIIs) works.
One Investment Fund Real Estate Investment Fund (FII) is an investment model that focuses on the property market. The financial resources of a property fund are managed by an investment manager, who is responsible for raising funds and managing the assets.
The aim of a real estate fund is to raise funds to buy or build property, or even to invest in real estate debt assets such as Real Estate Credit Bills (LCI) and Real Estate Receivables Certificates (CRI).
This type of investment is made in the form of shares. In other words, when you buy a share in a property fund, you become the owner of a small part of one or more properties that are part of that fund.
You won't have to worry about maintenance costs, taxes or all the bureaucracy involved in acquiring a property, as the fund manager will be in charge of the whole process, and these costs will already be deducted from the income that the properties that make up this fund will generate.
Speaking of returns, this is one of the points that makes this type of investment so attractive to investors. When you buy shares in a property fund, you will receive monthly income from the properties that are part of the fund, minus maintenance and administration costs.
In other words, you'll receive monthly rents in proportion to the number of shares in the property fund you have in your investment portfolio - and the best part: no income tax.
Types of Real Estate Funds
FIIs are divided into three categories. They are as follows:
Brick bottoms: Investments in this type of fund are allocated to physical properties, whether commercial (corporate buildings, bank branches, logistics warehouses, etc.) or residential. Brick-type funds tend to increase in value as their property appreciates.
Paper funds: Investments in this type of fund are allocated to property debts, such as Real Estate Receivables Certificates (CRI), Real Estate Credit Bills (LCI) and Mortgage Bills (LH). Funds of this type tend to increase in value as a result of the interest payments made when the capital is lent to companies in the property sector to finance their activities.
Hybrid funds: Investments in this type of fund are allocated to both real estate and property debt. Hybrid-type funds are a mix of brick-type and paper-type funds.
How to buy property funds?
To buy shares in property funds, you need to have an account with a stockbroker, as the shares are traded on the stock exchange. Stock Exchange of São Paulo (B3 - Brasil, Bolsa, Balcão). If you already have an account with a broker, all you have to do is type in the code of the real estate fund you want to buy shares in and send the purchase order via your home-broker (the programme the broker provides for its clients to send orders to buy and sell shares over the internet).
In the following articles, we'll explain how to analyse real estate funds in order to make better investment decisions.
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