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To become a skilled investor, it’s important to thoroughly research various investment types, regulations, interest rates, terms, acronyms, and more. Understanding these aspects can help reduce risks and maximize profits, though it can be daunting due to the complex terminology involved, especially for beginners.
The concept of affectation patrimony may be challenging for novice investors but can provide a sense of security when investing in real estate.
If you aim to become a successful investor and seek to understand the features of the real estate market to learn about the concept of property and its role in providing security, explore this article.
Real property
Investing in real estate offers an opportunity to expand your wealth and is considered one of the oldest forms of investment due to various investment methods available.
One of the most common methods is to purchase property, such as in a plant, with the intention of reselling or renting it out for a monthly profit.
Investing in the real estate market can be complex and risky despite its potential for high returns. The concept of impact heritage plays a role in reducing these risks.
Understanding the distinction between various segments in the real estate industry is crucial for grasping the concept of emotional heritage.
Employer, constructor, and property developer
Not all companies you establish will necessarily be the ones that sell a property. Three key sectors in the real estate industry include builders, developers, and real estate firms. Understand the distinctions among them.
Incorporator
The company is known as the entrepreneurial company. It is responsible for identifying opportunities, assessing project feasibility, securing funding, and managing all legal aspects. Typically, the company contracts a construction contractor for projects.
Constructor
The construction company is in charge of carrying out the physical tasks associated with a project, including managing the engineering design, hiring skilled workers, and overseeing equipment and other relevant aspects.
To discuss the impact on heritage, we will focus on the individuals responsible for incorporating. Find out why this system has become crucial in providing assurance to buyers and investors.
Real property
After the construction is completed, real estate management becomes important. Real estate companies handle the buying, selling, and renting of properties, earning a commission for each transaction from the property owner.
Impacting heritage: What does it entail?
Encol, once the biggest construction company in Brazil, went bankrupt in 1999 due to legal and management issues, leaving many unfinished projects and causing financial losses for investors, leading to a fragile real estate market in the country.
The adverse situation led to changes in the market, prompting the government to modify the laws regulating construction in the country in 2004 with the introduction of the Heritage Affestation Law. This legislation altered the landscape of the real estate market and investment practices.
Observe how the law operates in reality.
How does it function?
Encol went bankrupt partly because it utilized funds from one project to develop others, resulting in financial disarray. When declaring bankruptcy, Encol had numerous unfinished buildings due to a lack of available funds.
Under Affestation rules, a project cannot use funds raised for it for any other purpose or mix them with its own funds.
Under the Affestation Heritage system, companies must legally set aside funds for planned projects in a separate account. These funds are dedicated solely to that specific project and remain unaffected if the company encounters financial difficulties.
The introduction of the law on emotional heritage restored investors’ trust in the real estate market, which had been significantly affected following the Encol case.
Incorporators are not legally obligated to conduct activities within the patrimony system, which may concern investors.
To promote this more frequently, works under the regime are eligible for a Special Tax Regime (RET), resulting in significantly lower taxes compared to those not under it. This allows corporate companies to benefit from greater tax advantages, even if they find it less profitable to invest in a single purpose.
It is crucial to gather information about the company and the builder when looking to invest in real estate without taking on too much risk. Additionally, ensuring that the project is under the regime of patrimony of affectation is important.
Summary
The real estate sector offers great opportunities for investors, particularly those with expertise. Profit potential is diverse and significant, ranging from property development to sales and rentals.
For individuals new to finance, the real estate market may still pose some risks due to the potential for losses. However, understanding terms like “patrimony of affection” can help make investments more secure and strategic.
The Encol case caused significant disruption in the Brazilian real estate market during the late 1990s, leading to widespread distrust among investors and the public. This resulted in the approval of the patrimony law a few years later, aiming to restore confidence in the real estate market.
Entrepreneurs who are shaped by a compelling heritage system offer various benefits to investors, with the most crucial ones being:
- Funds allocated for the project are limited and cannot be reallocated for other purposes.
- Incorporator’s individual enterprise box.
- Even if the company goes out of business, ensure that the job will be finished.
- Reduced taxes for the business.
Investors should remain vigilant and seek information before investing in real estate projects, as the mere existence of laws does not guarantee compliance.
How about learning more about collective investments as a way to get involved in the real estate market with a lower initial capital requirement?
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