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CRIs, also known as Certificate of Real Estate Receivers, offer a unique investment opportunity in the real estate market that differs from traditional property acquisition methods.
In this text, we will investigate the nature and operation of CRIs and why they are a compelling choice for investors looking to broaden their investments in the Brazilian real estate market.
Should we?
What does CRI stand for?
Real Estate Receipt Certificates (CRIs) are fixed-income securities supported by real estate market operations, essentially representing a securitization of funding receivables provided by financial institutions for real estate ventures.
Banks, real estate developers, builders, and infrastructure companies provide funds that are sold to a securitizer for new ventures, who then issues CRIs. Investors who purchase these certificates become creditors of the payment streams from real estate financing.
Ballast
CRIs are secured by real assets, specifically real estate credits from the projects that generated them, providing greater security compared to other fixed-income securities like CDBs and LCIs. If debtors default, the guarantees can be executed to recover the investment.
CRIs are financial tools that provide benefits for real estate entrepreneurs and investors.
Business entity
Entrepreneurs may find CRIs to be a more affordable financing option compared to conventional loans, and they can also free up capital for future investments.
Individual person
CRIs offer investors a way to diversify their portfolios by providing indirect exposure to the real estate market without the need to purchase real estate directly. They can also yield attractive returns through interest rates and asset valuation.
Types of Customer Relationship Management
There are various types of CRIs, each designed to meet specific needs. In this section, we will discuss the main types of CRIs to help you assess the best investment options.
CRIs are uncomplicated ballasts.
This is the most frequent form of CRI, where investor payments are directly made to real estate receivables like rent or real estate financing benefits. This type is simpler as investors receive payments directly without requiring extra arrangements.
CRIs with dual ballast
In this kind of CRI, payments are supported by real estate receivables as well as other extra assurances like bailouts or insurance.
CRIs supported by rental income
Investors in these CRIs receive regular payments based on property rental income, providing a reliable source of income from various real estate sectors.
Real estate financing supported by CRIs.
This form of CRI involves providing financial support for purchasing residential or commercial properties, with investors receiving regular payments that cover financing advantages such as interest and principal repayment.
Construction receivables are granted by CRIs in the form of laminate.
CRIs are securities backed by receivables from real estate projects, providing investors with regular payments throughout the construction and/or completion phases.
How the CRI operates
The CRI operates through different phases, starting with creating real estate credits from transactions in the market. These credits are then passed on to a securitizer, who organizes them into a portfolio to support the issuance of CRIs.
Investors can acquire certificates through a public offer to receive regular payments.
During the CRI period, the securitizer has the responsibility of overseeing and handling these securities to guarantee that investors receive their payments correctly.
Investing in CRIs offers various benefits.
Tax exemption on income
One of the key benefits of CRIs is that they are not subject to income tax, unlike many other investments that can have taxes as high as 15%. This tax exemption applies even to CRIs with maturity periods longer than two years.
Safety
CRIs provide greater security compared to debentures because they are backed by a specific asset.
Earning potential
Many CRIs provide indexed yields to fixed rates, such as IPCA plus interest, IGP-M plus interest, Selic, or CDI, making them appealing due to their profitability.
Some rates can be very appealing, with certain CRIs exceeding 1% per month. Moreover, interest payments can be made regularly on a monthly, semi-annual, or maturity basis, providing investors with the chance to develop a steady income stream gradually.
Downsides of investing in CRIs
It is crucial to take into account certain drawbacks of CRIs, like the lack of liquidity and the significant initial investment required.
Trading at prices above R$ 1,000 makes it challenging for less affluent investors to participate. Additionally, the extended maturity periods might require negotiation in the secondary market if an investor needs to redeem funds early, potentially impacting their returns.
While CRIs provide better guarantees than debentures, they are not as strong as those provided by investments like LCIs, which are backed by the Credit Guarantee Fund (FGC).
What are the dangers of CRIs and how can they be avoided?
CRIs, despite their benefits, come with risks that must be acknowledged and managed effectively. This section will discuss the primary risks linked to CRIs and ways to minimize them.
Credit risk refers to the possibility of loss resulting from a borrower’s failure to repay a loan or meet other financial obligations.
One of the primary risks linked to CRIs is credit risk, which refers to the chance of debtors defaulting. To mitigate this risk, it is crucial to thoroughly assess the quality of receivables and the financial stability of the CRIs. Opting for CRIs issued by reputable financial institutions or those backed by additional guarantees can aid in risk reduction.
Market risk refers to the potential for losses due to changes in market conditions.
CRIs, similar to other investments, can be influenced by market changes, impacting their value and investor returns. Diversifying the portfolio and sticking to a long-term investment approach can help mitigate these effects.
Liquidity risk
CRIs typically have extended maturity periods and may lack liquidity. Therefore, it is crucial to assess the CRIs’ maturity and liquidity requirements before making an investment to minimize liquidity risk.
Concentration risk refers to the potential danger of having a large portion of investments in a single asset or asset class.
Investing in just one CRI or a particular real estate market sector may lead to a higher concentration risk in your portfolio. To reduce this risk, it is recommended to diversify your CRI portfolio across different issuers, types of assets, maturity dates, and geographic areas.
How to get started with CRI investments
Financial aid
Before you begin investing, make sure to learn about the workings, risks, and advantages of these securities through books, courses, articles, and advice from financial experts.
Define your investment objectives and characteristics.
Evaluate your objectives, deadlines, and risk tolerance to determine how CRIs align with your investment approach.
Create an account with a brokerage firm or financial institution.
Check the fees related to your account such as brokerage and custody charges, and select a financial institution that suits your requirements and provides a range of choices.
Conduct a market analysis
Before deciding on which CRIs to invest in, it’s important to conduct a market analysis to assess the available opportunities. Factors to consider include the quality of broadcasters, types of ballasts, maturity, interest rates, and risk. Consulting market analysis reports, staying informed about real estate news, and seeking expert advice can help inform your investment decisions.
Regularly monitor and evaluate your investments.
It is crucial to monitor your investments closely after making them and adjust your strategy as needed. Stay informed about market conditions, reallocate resources, and be ready to make decisions to safeguard and optimize your returns in the long run.
Summary
By following these steps, you will be prepared to begin your CRI investment journey and establish a strong, varied portfolio in the financial market. Remember to seek expert advice when necessary and base your investment choices on thorough analysis.
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