Previously, I mentioned that there are studies indicating that more than 60% of investments are unsuccessful.
I leave the article with a link in the image below:
Therefore, choosing the investment or Real Estate Investment Fund (FII) should be the main concern of the investor who wants to take his investments seriously. I will now discuss some criteria that I consider fundamental when choosing a real estate investment fund .
Quality of Real Estate Fund Management
In my opinion, management is the most important part of any business, and in the case of real estate investment funds it is no different. Finding talent in any sector is always challenging. Some tips I can offer are the following: Look for experienced managers who have been in the market for at least 5 years . Evaluate properties under management, as well as defaults and vacancies . An important detail is to evaluate the manager as a whole, as problems in a fund under its management can affect the performance of other uncorrelated funds . This is because the team can come under pressure and loss of focus becomes inevitable.
Time of Existence of Real Estate Funds
According to the classic definition of corporate finance , any company with less than 3 years of existence is considered a startup. Therefore, if you intend to invest in something very young, you must be aware that these companies or ventures still have a lot to prove and, therefore, the associated risks are greater. My advice is to allow them to demonstrate a little more of their work and, when the fund becomes more solid, you can consider investing . Of course you are not naive; With greater risks, there are also greater possibilities of gains. If you're just investing your own capital, it's easier to accept the risk, but if you're managing debt capital, the risks can keep you up at night.
Asset Diversification of Real Estate Funds
If the fund is a single-tenant and that tenant stops paying or vacates the space, the income will be affected in a binary way (zero or one). Likewise, a real estate investment trust with just one property to rent may be affected by rental price fluctuations in the local market. Therefore, a quality real estate investment fund must have a minimum number of properties , tenants and contract expiries . On the other hand, be aware that an excessive number of properties managed can result in high maintenance costs for the fund . A good practice is to continually monitor the rent per square meter and the maintenance cost per square meter .
Future Events of Real Estate Funds
Real estate investment funds may have their prices affected abruptly by some events. In another article I wrote , although it was not very well received by FII investors , I highlighted how the price of a FII can be impacted by events such as default or legal disputes over rental values. So it's always a good idea to get a rating from an analyst who follows the fund you're considering. Typically, fund managers themselves provide a list of analysts who cover their funds . Alternatively, you can talk to an investor who has had this investment in their portfolio for more than a year and ask for information about the latest news and points of interest.
Macroeconomic Analysis :
Finally, it is essential to carry out a macroeconomic analysis to understand how external events can impact the performance of the real estate investment fund in question. While this analysis cannot accurately predict the future, it still provides a compass for investors to navigate more confidently.
