Real estate funds

well, you know, investing in real estate can be like investing in eggs, and investing in a REIT is like investing in a whole basket of eggs.....so the risks are different but imho, they are about equal, since the likelihood of someone dropping the whole basket is somewhat less than the loss of individual eggs, but it would do a lot more damage if it does happen .....

Some of the answer will be related to tax laws in your country (Italy, it appears), which I am not familiar with.

For a US person, real estate funds in a country other than the US are highly disadvantageous. Foreign funds (mutual funds, REITs or FIIs here in Brazil etc) are considered Passive Foreign Investment Companies (PFIC).  The profits are taxed much more than with other investment vehicles, as a result. No such disadvantage exists with directly owned stocks, bonds, or real estate. None of that may apply to you though.

A more generic answer is a FII has advantages such as, no property maintenance and associated costs, no liability, ability to invest smaller amounts, and diversification across a number of properties or geographies.  Individual properties have advantages including the ability to enjoy the property yourself, full control, ability to (attempt) to exit the investment any time by selling, full control, ability to purchase with leverage (although interest rates in Brazil are so high this may not be an advantage financially).

If you don't have much to invest, are not interested in maintenance, then a FII would likely be the way to go. If you've got lots of money, like the idea of a property you may be able to use yourself, are willing to do the due diligence that goes with buying property, have tax benefits related to physical real estate, and so forth, then a physical property would be the way to go.

With an FII, dividends are not taxed but capital gains from the sale of shares is taxed. With physical real estate both rents and capital gains are taxed, at different rates depending on your tax status in Brazil.

Not sure if I need to start a new topic, but I'm interested to see if dividends from securities (stocks) are taxed?

Dividends are not taxed in Brazil currently.  That said, there is a tax reform proposal making its way through government which may change that. 

This is separate, but related; capital gains from the sale of stocks, under R$20,000 per month, are also not taxed.

    I am wondering if it would be safer to invest (if feasible) in real estate funds instead of investin directly in real estate.
And would it be true that dividends from real estate funds would be tax free in Brazil? (I heard this one in a Telegram channel)
Thanks in advance for any input
   

    -@glimpser

Their sales pitch will say , yes they are safe to invest.

The Reality is  completely different.

Very few hold industrial holdings ( shared warehousing condos ).  And even if this class of asset is doing relatively well, Capacity Planing in Brazil is an oxymoron.  No one does it. The ones who appear to do so, they hire  thrid party research firms for the record.

The majority of these funds ( Brazilian and Foreign Subsidiaries for Investment Firms )  is heavily stuck on office portfolio, and vacancies on real estate office lease deals and notices to vacate  are  severely under reported, if not outright dishonest. 

Until you can do due dilligence on your own, stay clear from it.

And by the way.....

Not a single one of these Brazilian Held  REIT funds own a Residential Portfolio. 

Take from the late Sam Zell. He sold Office Equities and kept  Equities Residential.

And there are no hotel, land, or data center REITS in Brazil, while at it. 

REsidential leasing has a more fluid and is cash flow positive against office leases. 

And Brazilian Transparency on Corporate World is a joke.

Disclaimer.  I read a lot of these Brazilian REITs portfolios ( in Portuguese, and really "fun" to do pursuit.

The majority of these funds ( Brazilian and Foreign Subsidiaries for Investment Firms )  is heavily stuck on office portfolio, and vacancies on real estate office lease deals and notices to vacate  are  severely under reported, if not outright dishonest. 

Until you can do due dilligence on your own, stay clear from it.
   

    -@sprealestatebroker

Do you happen to know (or speculate) why those investment firms only invest in commercial rather than residential business? 

My guess is that there is not a big enough residential lease market as Brazil has a high home ownership rate (~74% from this source -> https://tradingeconomics.com/brazil/home-ownership-rate).  What other factors do you think are at play here?

I also agree that commercial REITs are also a tricky business anywhere and are not for the faint of heart.  I have stayed clear of those schemes - even the investment that Jeff Bezos is promoting.

My father in laws pension fund owns Barra Shopping in Rio.......

@Gasparzinho 777. I suspect that the shopping mall funds is ok as the vacancy rate / economic activity is visible.  If this is a pension fund, i am sure that this investment is closely being watched by a professional as this affects many people.

My sister works for a residential housing complex targeting universities.  The company covers the whole of the US.  The issue is that for new projects, she needs to raise funds and spend on various building campaigns.  Although the accounting system is quite reliable in the US and Canada, a lot of the spending is subject to legal interpretation (for example - the Trump saga) - but fortunately there is legal recourse.

I am not sure that, as an individual investor, I will have the guts to figure out the ins and outs of real estate financing and spending in Brazil.  I do not have the skills beyond reading and interpreting financial statements.

BTW, I really like your investment strategy.  You seem to have identified all your levers of financial control and exercise them to your advantage.  I suspect that you will do better than any real estate REITs or similar funds.