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Learn about the main strategies used by investors to gain additional gains with FIIs

• In December 2020, the segment registered 3.73 million shareholders. This represents an increase of 91.7% over the previous year
• With this great adhesion, there was also an increase in the average daily traded volume, which reached R$207.9 million last year
• But it is necessary to know the main techniques to profit more from Real Estate Funds to understand their risks and advantages

Also, read How to choose a safe and profitable investment?

The industry of real Estate Funds (FIIs)has been growing rapidly. In December 2020, the sector registered 3.73 million shareholders, an increase of 91.7% over the previous year, according to a survey by Economica, based on data from B3

With this large influx of investors, the average daily traded volume also increased, which reached BRL 207.9 million last year — which guarantees the liquidity of the papers in the secondary market, opening the possibility for investors to adopt additional earnings strategies with real estate funds.

Learn about the main techniques to profit more from Real Estate Funds, as well as their advantages and risks.

1. Arbitration of Real Estate Funds

Arbitrage is a strategy that takes advantage of the difference between the price of the subscription offer for a Real Estate Fund quota and its quotation in the secondary market. As the value per share in the offer is usually lower than the value practiced over the counter, the investor can increase his participation in the fund with the difference in quotations.

The method is more suitable for investors with a consolidated position in the FII and who have average share prices with the possibility of some profit. For the “early position” investor, the strategy makes little sense. The technique allows the investor to produce additional gains with the REITs and reduce the implicit costs of the offers.

The arbitration takes place in the first subscription stage when the investor sells a position after the reporting date. After calculating the 20% income tax due on the income, the remaining funds can be used to repurchase the shares at a lower price.

The investor can carry out the arbitration in full when he decides to trade with all his shares available, or in part, in case only part of the shares are arbitrated. The transaction’s net profit is calculated as the difference between the sale value of the initial amount, net income tax, and the repurchase price.

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The strategy is only advantageous when the issue price is far below the market price. Due to income tax and the delay in receiving subscribed shares (which can take two months), subtle differences do not usually bring positive returns to investors and can generate losses.

2. FII flipping

Another way to make more money with real estate funds is flipping, which is a speculative strategy that consists of the advance purchase of shares of Real Estate Funds for later sale on an opening day. The expression comes from the English verb “to flip”, which means to turn or turn suddenly or suddenly.

The technique is adopted in the final phase of the issuance process when the newly issued shares are traded on the secondary market. The additional gain is possible, as generally, the issue price is lower than the trading value on the secondary market.

Thus, the investor can participate in the offer by acquiring shares at a lower price to sell them on the date of conversion at market value, pocketing the difference.

However, flipping involves risks. The receipt of subscribed shares takes, on average, between 45 and 60 days. During this period, market conditions can be very different from the time of issuance.

Thus, there is a possibility that the trading price of the shares is below the offer value and the operation may not be profitable. This can occur when the trading volume is insufficient to promote an appreciation of the shares.

In this case, the investor must reflect on whether it is convenient to sell the share below its issue price, assuming the loss, or wait for the share price to exceed the value to have gained.

Pre-flipping

The investor may also choose to sell the share before the base date of issue and even before the announcement of the subscription offer. This strategy called pre-flipping is derived from the prior technique.

The method takes advantage of a common movement of the falling price of shares in the secondary market, after the base date of an offer, to carry out the sale before an eventual devaluation.

This happens because there is a quotation adjustment by B3 after the subscription, which can also be caused by the action of market agents that may be making sales and pushing the price down in the secondary market.

However, the transaction may be frustrated if the issue is canceled or extended, leaving the investor without a position in the Real Estate Fund, as well as unable to repurchase the asset for the price paid before.

3. Rent of shares

In November 2020, B3 started to allow the rental of shares of Real Estate Funds, an operation that is well known in the stock market. This opened up the possibility of new strategies to earn more with Real Estate Funds.

Investors who bet on a devaluation can rent shares to sell them in the secondary market, in a strategy known as short operation, in other words, selling short. When the quote drops, the quote can be repurchased to return to the owner. The difference between the high sell price and the low repurchase value is the profit made by the strategy.

There are also some derivations of the share rental method. In open arbitration, the investor rents a share sells on the secondary after the base date of an issue buys it via subscription, and returns it to the owner when the shares are paid up. In short pre flipping, the investor borrows the share, sells it before the base date, buys it on the cheaper secondary, and returns it to the donor.

The main risk of this additional earnings strategy with real estate funds is the unpredictability of future market movements. After the sale of the asset, the share may not depreciate until the end of the lease, generating losses for the investor.

Also, read The Four Best Investments for Beginners

Even in today’s foundering market, Real Estate is still a lucrative business, and one that’s well suited for the Internet. But it’s not enough to simply throw up a free blog and expect buyers and sellers to come rushing to your site. If you want to make money buying and selling Real Estate online, you’ll need a good website and a lot of quality, informative content.

Get a Professionally Designed Website: More and more people use the Internet to find the information they’re looking for. Very few people pick up the Yellow Pages to find anything any more. When someone wants to buy or sell a home, the first thing they’re going to do is turn to the Internet and land on your website.

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When you’re asking someone to buy a home or trust you to market their home for them, you’re asking them to trust you with a very large investment. A well designed website will help establish your credibility. Remember, you only get one chance to make a good first impression!

Make Sure Your Site is Optimized for the Search Engines: You might have all the best information, dozens of photos and even a video tour of each property on your site. But if your site isn’t optimized for the search engines, no one will ever see it. Search engine optimization (SEO) is a must for every Internet business owner, but even more so for a Real Estate website. It’s important that your listings appear in the local search indexes so you’re found by those people who live locally and want to buy or sell a home in your area. And it’s also important that you appear in global searches for those who might be considering moving to your city.

Provide Plenty of Information: The most important aspect of your site is the information you provide. Home buyers want to know what schools are in the area, what shopping is nearby, is it close to the business district, what type of entertainment is in the area, and anything else you can think to tell them about the city or area. They also want to know all about the home – how old is it, how many square feet, how old is the roof, how many bedrooms, how many baths, and on and on… You can never provide too much information for a home buyer. In fact, no matter how much information you provide, they’re always going to want more!

Sellers, too, need to know things like how can they save money on home inspections and what do they have to do about taxes, who’s responsible for fixing the fireplace and who pays the Real Estate fees.

Think about including things like maps of the area, a listing of shopping or attractions with hours of operation, a listing of churches, schools, libraries and other community services. Provide check lists of what to look for when you’re looking for a new home, what to provide if you’re selling a home, tips on how to move across town or out of state, how to transfer prescriptions and school records.

The more information you include on your website the more credible and authoritative you’ll appear to potential clients. And each article you include will be one more place for your site on the search indexes. Buyers and sellers will probably still have questions, but they’ll be much more apt to ask YOU those questions, instead of someone else, if they can see that you know what you’re talking about.

Generate a Mailing List: One thing that Real Estate agents did way back before the Internet was to make sure they got every name and address they could and add it to their mailing list. A mailing list is still an important piece of business, but now you need to generate an email mailing list.

If you’re set up your site properly and paid proper attention to SEO, then nearly every person who visits your site is interested in Real Estate in your area for some reason. The problem is, most of those visitors are going to need personal attention from you before they’ll become your client. Very few people make a Real Estate decision online the very first time they see the information. So you’ll need their contact information so you can give them that attention.

The easiest way to get their email address is to offer your visitors something in exchange. Offer them a free download map of the area that shows all the special attractions or offer them a free listing of houses that have been reduced in price. Offer them something valuable, that they won’t anywhere else, and you’ll have them signing up for your email right away. Everyone wants something for free.

Once you have that email address, don’t be afraid to use it. Send potential buyers your newest listings and let potential sellers know you have buyers looking for properties. If you’ve set up a nice site with lots of information, the you have everything you need to make money buying and selling Real Estate online, and you can make a very good living at it, too.