FIIs: the five mistakes that lead real estate investors to lose money; check the list

In the last four years, the number of Brazilians investing in FIIs rose from 208,000 to 1.68 million, according to B3 data. With a newly formed investor base, it is natural to have doubts and even errors in the investment strategy. Simple adjustments, however, can increase the chance of success with real estate funds, traditionally less volatile than stocks.

Even in the most challenging times, real estate funds have defended the investor’s assets well. In the last twelve months, for example, the IFIX, the index of the most traded FIIs on the Stock Exchange, recorded a rise of 3%, against a 22% drop in the Ibovespa, the main index of the B3.

In addition to the resilience of the FIIs, some precautions can further ensure the security of the portfolio of real estate fund shareholders, especially that of the most beginners.

O InfoMoney heard experts about the main mistakes made by investors and what to do to avoid falling into traps. Among the tips are attention to the value of the share, correct reading of dividends, diversification, moving away from the so-called “herd effect” and understanding what is inside each fund.

Discover the step-by-step guide to living on income with FIIs and receiving your first rent in your account in the next few weeks, without having to own a property, in a free class.

First mistake, buying an FII quoted above the book value

Just like a consumer, who will hardly pay more than a product is worth, the real estate fund investor also needs to take into account the price at which the FII is being negotiated.

“Usually, the share of a fund starts to rise a lot and the investor thinks that the uptrend will remain indefinitely”, warns José Navikas, FII analyst at Necton. “Investors don’t realize that, at a given moment, the price over book value is very high”, he reflects.

To measure whether a fund is expensive or cheap, analysts use the P/VPA (price over book value) indicator. The closer the number is to 1, the closer the share is to its fair value. An indicator above 1 signals that the stock is trading at a premium and, below this level, at a discount.

The P/VPA gains even greater relevance in the analysis of receivables FIIs, also known as “paper” funds, as they invest in financial assets linked to the real estate sector. The warning comes from Felipe Ribeiro, director of alternative investments at Clube FII, who recalls that the share price tends to return to its equity value. Buying the FII with a large premium could generate losses in the future, warns the expert.

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Second mistake, forgetting that diversification is necessary

Another maxim of the financial market that cannot be missing in the investment strategy of real estate funds is the famous “don’t put all your eggs in one basket”.

Given the variety of funds and segments – receivables, logistics, shopping malls, offices, among others – diversification is essential for investors to reduce portfolio risks, says Arthur Faviero, FIIs analyst at Ohmresearch.

“No matter how good the fund is, a high concentration can harm the portfolio at certain times”, explains the specialist. According to him, a problem in the portfolio could compromise a good part of the dividends received by the shareholder.

In Faviero’s assessment, diversification is a very important issue and investors are not always aware of this care. Most, he explains, prefer to have few funds with high concentration, which ends up bringing a certain fragility to the portfolio.

Herd effect on FIIs, the third mistake

Good management of a portfolio of real estate funds also depends on the investor’s ability to move away from the so-called herd effect, the tendency to repeat the behavior of a certain group in search of better results or lower risks.

“When the movement happens, it is natural that many people start talking about the real estate fund”, says Marcelo Fayh, author of the book Fayh Method: Discover How to Choose the Best Real Estate Funds on the Market and Viva de Renda. “But normally the investor ends up losing money when being contaminated by the herd effect”.

In April, one of the most popular real estate funds on the market, Hectare CE (HCTR11), faced a strong selling wave after digital influencers drew attention to a possible conflict of interest in the FII’s operations.

Speculation about the problem has sent the fund’s shares down more than 16% in four sessions. After the disclosure of the fund’s management report – which denied irregularities in operations – Hectare’s shares rose again and recovered part of the losses accumulated during the episode.

The investor who gets carried away by these types of movements – buying or selling in extraordinary situations – also makes a common mistake and can pay dearly in the future, says Fayh.

Those who only see dividends make the fourth mistake

Among the main mistakes made by real estate fund investors reported by analysts heard by the InfoMoneyone is consensus: the selection of an FII based only on the rate of return with dividends (dividend yield).

As most FII investors seek to generate passive income, it is natural that the dividend yield stand out in the valuation of a fund, reflects Rodrigo Medeiros, analyst at Desmistificado FII. However, points out the expert, choosing the portfolio without analyzing the origin and quality of earnings is a mistake.

“An error that can make an investor acquire a fund that pays a high dividend in an artificial or non-recurring way”, he explains. “Thus, the investor temporarily receives a good income and can lose everything and a little more with an eventual devaluation of the quota”.

Non-recurring income may result from the sale of one of the fund’s properties. This is the example of SP Downtown (SPTW11) which, in March 2021, sold one of the two buildings it had in its portfolio and distributed the revenue from the business – R$ 67 million – to shareholders, in the form of amortization of equity.

In practice, payment for the Belenzinho building, located in São Paulo (SP), was made in three installments. In the months of transfer to investors, the dividend yield of the fund diverged from the normal distribution of the fund, reaching 6.36%, as indicated on the SP Downtown page on InfoMoney.

Source: InfoMoney

The transaction and the extraordinary pass-through put SP Downtown on the list of the ten highest dividend yields in the last 12 months, with 14.81%. Situations of this type can confuse the most inattentive investor, suggests Fayh.

“The investor sees the dividend yield from the bottom, which is extraordinary, and ends up frustrating”, he agrees. “It is the easiest mistake to make because the investor wants dividends and he will see the fund that distributes the most”.

Fifth mistake, investing without knowing what

What’s inside your real estate fund? The question may seem nonsensical, but having knowledge of the FII’s assets and operations can make a difference in the success of the investment strategy, analysts say.

Necton’s Navikas emphasizes the importance of analyzing a fund’s asset portfolio as a way of positioning itself well and avoiding pitfalls. “For example, investors start to buy FIIs of receivables, with many inflation-linked bonds, but the moment is when inflation is falling”, he exemplifies.

In Fayh’s assessment, the investor needs to study enough to understand the situation and the functioning of the real estate fund. Otherwise, says the expert, the chance of the shareholder being lost in a situation of adversity is very high.

“When news comes out that influences the fund’s price, the investor doesn’t know how to act and depends on other people to measure the impact of the information”, he analyzes. “Not knowing the asset you are investing in is very bad”.

For Fayh, many investors can make decisions influenced by opinions that are not always based or even anchored in the herd effect. “Studying about the FII is fundamental”, she says. “Investing in something you don’t know is very dangerous. It is an invitation to make bad investment decisions.”

Discover the step-by-step guide to living on income with FIIs and receiving your first rent in your account in the next few weeks, without having to own a property, in a free class.

About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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