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CRIs, also known as Certificate of Real Estate Receivers, offer a unique investment opportunity in the Brazilian real estate market, distinct from traditional property acquisitions.
In this text, we will investigate the definition and functioning of CRIs and why they are an appealing choice for those looking to broaden their investments in the Brazilian real estate market.
Should we?
What does CRI mean?
Real Estate Receipt Certificates (CRIs) are securities tied to real estate market credits, serving as a securitized form of financing receivables provided by financial institutions for real estate ventures.
Banks, real estate developers, builders, or infrastructure companies provide funds for new ventures by selling credits to a securitizer, who issues CRIs. Investors who buy these certificates become creditors receiving payment flows from real estate financing activities.
Ballast
CRIs are secured by real estate assets, offering greater security compared to other fixed-income securities like CDBs and LCIs, which are backed by bank loans.
CRIs provide various benefits for real estate entrepreneurs and investors.
Entity recognized by law
CRIs offer entrepreneurs a more affordable financing option compared to conventional loans and also allow for the release of capital for future investments.
Individual person
Investors may consider CRIs as a way to diversify their portfolio by offering indirect exposure to the real estate market without the need to purchase real estate directly, potentially yielding appealing returns through interest rates and asset appreciation.
Types of Customer Relationship Management
There are various kinds of CRIs, each with distinct features tailored to different needs. In this section, we will discuss the main types of CRIs to help you assess the optimal investment choices.
CRIs ballast is uncomplicated.
This type of CRI involves payments being made directly to investors from real estate receivables, like rent or real estate financing benefits. It is simpler as investors receive payments directly without requiring additional structures.
CRIs with two ballasts
In this kind of CRI, payments are supported by real estate receivables as well as other supplementary guarantees like bailouts or insurance.
CRIs supported by rental income
CRIs are backed by rental income from real estate properties, such as commercial, industrial, or residential. Investors in these CRIs receive regular payments based on the rents collected from tenants, providing a dependable income stream.
CRIs are supported by real estate investments.
This particular CRI involves financing payments provided for purchasing residential or commercial properties, with investors receiving regular payments that cover financing advantages such as interest and principal amortization.
Construction receivables are covered by CRIs laminate.
Investors in this type of CRI can receive regular payments throughout the construction phase or project completion.
How the CRI operates
The CRI operates through multiple stages, starting with the creation of real estate credits derived from transactions in the real estate market. These credits are then pooled by a securitizer to form a portfolio that supports the issuance of CRIs.
Investors can acquire CRIs through a public offer, enabling them to receive regular payments.
During the CRI period, the securitizer is in charge of overseeing and handling these securities to ensure investors receive their payments correctly.
Benefits of investing in CRIs
Exemption from paying income tax
The CRI offers a key benefit of being free from income tax, unlike other investments that are typically taxed at rates up to 15%.
Safety
CRIs offer security in addition to tax exemption, with greater assurance compared to debentures as they are backed by a specific asset.
Earning potential
Many CRIs are appealing due to their profitability, as they provide indexed returns based on predetermined rates like IPCA plus interest, IGP-M plus interest, Selic, or CDI.
Some CRIs have appealing rates, exceeding 1% per month. Investors can receive interest payments monthly, semi-annually, or upon maturity, allowing for a steady income stream to be developed gradually.
Disadvantages of putting money into CRIs
It is essential to take into account certain drawbacks of CRIs, such as liquidity concerns and the significant initial investment required.
Prices above R$ 1,000 make it challenging for investors with limited funds to participate, and the extended maturity periods may require trading on the secondary market if funds need to be retrieved early, potentially impacting returns.
CRIs provide better guarantees than debentures but are not as strong as LCIs, which are protected by the Credit Guarantee Fund (FGC).
What are the dangers of CRIs and how can they be avoided?
CRIs, despite their numerous benefits, come with risks that must be acknowledged and managed through appropriate strategies. In this section, we will discuss the primary risks related to CRIs and ways to minimize their impact.
Credit risk refers to the possibility of financial loss due to a borrower’s failure to repay a loan or meet their contractual obligations.
One of the primary risks linked to CRIs is credit risk, which refers to the chance of debtors failing to meet their obligations. To mitigate this risk, conducting a thorough evaluation of the receivables’ quality and the financial stability of the CRIs is crucial, as CRIs from reputable financial institutions or with supplementary guarantees can aid in risk reduction.
Market risk refers to the potential for losses due to fluctuations in market conditions.
Investments like CRIs can be influenced by market fluctuations, impacting their value and investor returns. Diversifying the portfolio and sticking to a long-term investment approach can help mitigate these effects.
Liquidity risk
It is important to assess the maturity and liquidity needs of CRIs before investing to mitigate liquidity risk.
Concentration risk refers to the potential danger of having a large portion of investments in a single asset or a small number of assets.
Investing in just one CRI or a particular real estate sector can lead to a concentrated portfolio risk. To reduce this risk, it is recommended to diversify the CRI portfolio across different issuers, asset types, maturity dates, and geographical areas.
How to begin investing in CRI
Financial help
Before beginning to invest, it’s important to learn about the workings, risks, and benefits of these securities through books, courses, articles, and guidance from financial experts.
Define your investment objectives and characteristics.
Evaluate your goals, deadlines, and risk tolerance to determine if CRIs align with your investment strategy.
Open a new account with a broker or financial establishment.
Review the fees for brokerage, custody, and other services linked to your account, and select a firm that aligns with your requirements and provides a diverse range of choices.
Conduct a market evaluation.
Before deciding on which CRIs to invest in, conduct a market analysis to assess the potential opportunities. Consider various factors like broadcaster quality, types of ballasts, maturity, interest rates, and risks. Refer to market analysis reports, follow real estate news, and seek advice from experts to help you make informed choices.
Monitor and evaluate your investments frequently.
It is essential to monitor the progress of your investments diligently and adjust your strategy as needed. Stay informed about market trends, reallocate resources when necessary, and be ready to make decisions to safeguard and enhance your returns in the long run.
Conclusion
By following these steps, you can begin your CRI investment journey and create a strong and varied portfolio in the financial market. Remember to seek expert advice when necessary and make investment choices after thorough analysis.
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