The investment market offers a multitude of products that can be combined to create a strategy aligned with the investor’s goals. When it comes to buying and selling real estate and the real estate market, it is impossible not to talk about real estate funds.
To understand real estate funds, you first need to know what investment funds (IF) are.
Investment funds are a type of financial investment characterized by the existence of several investors, who come together to make joint financial investments, aiming to achieve a common objective.
In this way, investors acquire shares in an investment fund and divide the income and expenses proportionally to the shares acquired. The administration of the fund is carried out by specialist professionals hired for this purpose.
The administrators/managers are responsible for assembling the asset portfolio and managing it. They are remunerated by quota investors in accordance with the policy and rules defined in the fund.
That said, real estate funds are a type of investment fund focused on applications aimed at real estate developments. Therefore, they are investment funds that invest resources in real estate market assets.
Among the assets are, for example, mortgage notes, shares of other real estate investment funds, mortgage notes, certificates of additional construction potential, and certificates of real estate receivables, among others.
The investor who opts for the real estate fund invests in the market without the need to buy or sell a property. Real estate investment funds are provided for in Law 8668/93 and are regulated by CVM Instruction 472/08.
The investor’s only obligation is to purchase the shares. From then on, all the management of the real estate fund is carried out by the manager.
This professional is responsible for monitoring the market and the fund’s equity on a daily basis. Based on economic movements and results, it allocates resources, aiming to achieve the best possible profitability.
When talking about investment funds in general, you need to understand what management is and what quotas are.
Administration/management is the procedure performed by an institution authorized by the Securities and Exchange Commission to provide the service. All administrative activities for managing the fund are the responsibility of the manager, including the disclosure of information to shareholders.
The real estate investment fund’s assets are distributed in quotas. These shares represent fractions of the equity and must be nominative and book-entry. This means that it is not a certificate, but just an electronic registration on behalf of the investor.
The quotas guarantee equal rights and duties to all quota holders, in the percentage of their participation in the fund. In this way, by investing in a real estate investment fund, you become the owner of a share proportional to your investment.
Despite owning a part of the fund, the shareholder cannot exercise real rights over the properties that make up the fund’s assets, nor are they personally liable for the manager’s contractual and legal obligations.
Every investment has a risk and real estate investment funds are no different. In this case, the main risk is the market risk: political, financial, and economic risks. In practice, situations such as changes in interest rates, changes in laws, and currency devaluation can affect investment.
As it is a specific investment in the real estate market, there are also risks associated with this market: changes in the sector’s regulation, in the real estate occupancy rate, devaluation, and availability of offers on the secondary market.
In this way, buying shares in real estate investment funds can bring property losses related to problems such as market and economic volatility.
To remain safe in relation to these risks, investors should seek to diversify their investment portfolio. When choosing financial products, do not focus only on an asset, but on a set of assets that can bring more security and profitability, reducing risks and expanding your investment possibilities.
