Real estate investment funds: what are they and how to have passive income with them?

 And there are several strategies that allow you to achieve this goal. One of them is investing in real estate investment funds (FIIs).

Living on passive income and not having to work more out of obligation is the dream of many people.

It is a type of collective investment in which shareholders are entitled to participate in the results achieved by the manager. One of its features is the distribution of dividends — which can be done monthly, generating passive income.

Want to know more about it? Check out what real estate investment funds are and how to live on passive income with FIIs!

What are real estate investment funds?

FIIs are one of the types of investment funds . This group represents financial vehicles through which different investors can invest. The portfolio is allocated according to the type of fund and the manager’s strategy.

It is possible to find fixed income, equity and other funds in addition to the real estate investment fund — or FII. In it, the shareholder’s capital is directed to the real estate market, as the name suggests. Thus, you can expose yourself to this sector without having to acquire a property.

How do real estate investment funds work?

Once you know the concept, it is worth understanding how real estate investment funds work. In practice, investors interested in FIIs acquire shares, which are traded on the B3 — the Brazilian stock exchange.

In this way, just access the home broker available on the platform of your stockbroker or investment bank to have access to them. After the acquisition, the investor has the right to participate in the results achieved by the fund manager .

Gains can occur through the appreciation of shares or the receipt of dividends. The latter are a part of a fund’s profit, which is distributed to shareholders. Remuneration can be paid monthly, semiannually or at another frequency, depending on the FII.

What are the main types of FIIs?

Real estate investment funds are not all the same. There are three main types of FIIs available in the financial market. Check out what they are!

brick backgrounds

The brick real estate fund is a type of FII that focuses its resources on physical properties. It can focus on building, buying and selling or leasing properties. For example, logistics warehouses, shopping malls and bank branches.

paper backgrounds

In turn, paper funds prefer to allocate most of their resources to fixed income securities in the real estate sector. This is the case with certificates of real estate receivables (CRI), real estate credit notes (LCI) and mortgage notes (LH).

funds of funds

Also called FOFs, funds of funds prioritize the acquisition of shares in other real estate funds.

What are the advantages of investing in FIIs?

After all, the price of shares is much lower than what is necessary to buy a property directly, for example. Another highlight is the wide variety of real estate funds available on the market. Thus, it is possible to find an alternative that matches your profile and goals.

If you are considering investing in a real estate fund, it is worth understanding its possible advantages. One of the positive points of the FII is the low initial investment, compared to other strategies that allow taking advantage of the results of the real estate sector.

In addition, this type of investment can feature a high level of diversification — especially the fund of funds. With this, there is a dilution of risks, which can bring a greater sense of security to the investor.

There are also positive aspects related to investment funds in general. For example, practicality. This is because it is the managers who select the best investment alternatives.

Transparency in management can also be considered a benefit. The manager makes periodic analyzes of the performance of the FIIs and produces monthly reports. From there, you can track the results of your equity.

What are the risks of investing in FIIs?

As you have seen, real estate investment funds have several benefits. However, there are also risks when investing in FIIs. Therefore, you need to consider them to know if the alternative is valid in your strategy.

One of the risks is that of the market, as the prices of shares fluctuate on the stock exchange. So, depending on supply and demand, it can go up or down. If you sell it for a lower price than you bought it, you will lose money.

Another risk to consider is that of liquidity. As the FIIs are traded on the stock exchange, the sale of shares to redeem the money depends on the interest of other investors to buy them. In this case, there is a risk of not being able to trade and redeem your capital in the desired time.

How to earn passive income through FIIs?

Now that you know about real estate investment funds, you may be wondering how it is possible to earn passive income through them. The opportunity arises because the FIIs are obliged to distribute a good part of their net income with the shareholders.

Thus, investors will receive dividends related to the operation of the funds. Depending on the type of FII, the frequency of distribution may be higher. This is often the case for funds that focus on rental properties, for example.

As the real estate fund will receive monthly rents, it can pass on dividends to shareholders every month. Paper funds, on the other hand, can pay dividends at longer intervals, as the profit depends on fixed-income securities or other FIIs.

Considering these aspects, it becomes easier to assemble a strategy with your personal financial planning to live on passive income with the receipts of FIIs. But when choosing the best real estate funds, you need to know what to analyze.

In general, it is important to evaluate the manager, the size of the fund, its portfolio, the liquidity of the shares, the history of earnings, the risks, among other factors. In cases of brick funds, also check the location of the properties and the vacancy rate.

Now that you already know what real estate funds are and how to have passive income with them, evaluate if this alternative is interesting for your investor profile. Also, carefully analyze the options available to make informed choices that align with your goals.

If you have any questions during the process, contact us at Confiança Planejamento Financeiro and find out how our consulting and planning service can help!

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