Real Estate Letters of Credit have caught the attention of investors in recent years.
This is due to the great ease of application, security and good profitability linked to Real Estate Letters of Credit in the financial market.
Therefore, if you want to use Real Estate Letters in your investments, try to understand this title better.
What is GFI?
GFI stands for Real Estate Letters of Credit, which are fixed income securities issued by banks and brokers.
The purpose of the issuance of these investments is to reinforce the financing of the real estate sector, an area in constant growth in the country.
Therefore, by investing in GFI, you lend your money to the institutions to use it to finance the activities of this sector.
As a result, you receive this amount after a period agreed between the bank with the accrual of interest.
Among the possibilities of profitability of GFI, we have;
- Pre-fixed GFI ;
- Postfixed GFI ;
- Hybrid GFI.
In the pre-fixed mode, the investor already knows, when buying the security, what will be their income obtained at the end of the period of application.
In the post-fixed option, more common in the market, the security is linked to a financial index, which in this case can be the CDI ( Bank Deposit Certificate ) or the Selic Rate.
In this mode, profitability fluctuates overtime beyond the value of the investment, as the economy may experience positive and negative variations during the investment period.
Finally, we have the hybrid type, which combines a pre-established rate with the variation of an indexer, such as the IPCA, as follows: IPCA + X%.
Real Estate Credit Letter Features
GFIs are considered medium-term investment options with a maturity of 3 months to 4 years.
They have a very significant benefit for most fixed-income investors, which is the protection of the Credit Guarantee Fund ( FGC ).
This means that values of up to R $ 250 thousand are guaranteed per institution, CPF or CNPJ.
Therefore, if you default on the bank issuing the bank, you will not suffer any loss below this amount.
Taxation at GFI
A very important point for investors to consider, but which is by no means definitive, is the exemption of income tax from GFI.
However, this benefit that ensures higher net profitability is unique to individuals.
In the case of legal entities, the collection follows the IR regressive table :
- Investments up to 180 days = rate of 22.5%;
- From 181 to 360 days = 20% rate;
- From 361 to 720 days = 17.5% rate;
- Over 720 days = 15% tax rate.
That is, the longer the investment period, the lower its taxation and higher its results.
Mortgage Letter Deadlines
It is common for fixed income securities to have two types of maturity. Are they:
- Maturity: Date on which the payment for the security was agreed, ie, the investor will receive back the amount applied plus the interest earned;
- Grace period: Minimum period that money must be applied. During it, it is not possible to withdraw money without losing profitability. After it, the investment has daily liquidity.
For both GFI and LCA, the grace period stipulated by the National Monetary Council ( CMN ) is 90 days.
Therefore, it is not interesting to invest in these options if you may need this money before this deadline.
The maturity may vary depending on the financial institution used to purchase the security, with the largest offering greater returns to the investor.
Minimum amount to invest
This type of investment has a minimum application that varies according to the issuer. But overall, the minimum amount to invest in GFI ranges from $ 5,000 to $ 30,000.
In addition, the higher the amount invested, the higher the fees paid by issuers. Therefore, the best returns are always above $ 30,000.
Risks of Real Estate Letters of Credit
Even though it is a low risk and high return option, GFIs have some negative points to be analyzed. Are they:
As it is a medium-term investment, the redemption amount applied, represented by liquidity, only occurs after a long period (between 3 months and 4 years).
This means that the investor only gets back the money invested at the end of the term.
But to get around this, there is the option of selling the bond to another investor or the issuing institution.
However, the return on investment, in this case, will be much lower than that obtained after the full expected period.
A curious point is that larger banks usually pay less than smaller banks to the investor. This happens because there is strong competition between these institutions.
Undoubtedly, an investment made in a large bank or broker in the market offers a very low risk.
However, in general, there is a possibility that the issuing institution will go bankrupt, compromising the return of your money.
As already said, the FGC exists to protect the investor in cases like this, but to avoid distress, research the financial institution’s history well before choosing it.
How to invest in Mortgage Bills?
To start investing in GFI, you must have an account with a bank or broker.
To choose the best one from those available, it is important to remember that the most popular does not always mean the most beneficial.
This is because, according to your financial goals, it may not be the most appropriate.
Therefore, compare all options before making your choice by analyzing their fees and charges charged and offered.
This way you will avoid paying for services you might never use, saving you more money to invest.
After that, you should transfer the money to be invested in the account and choose the ” fixed income securities ” mode.
After that, select the GFI and its compensation category. Usually the most popular are prefixed and postfixed.
Therefore, observe all conditions offered by the financial institution, such as maturity, liquidity, the economic index used and predetermined remuneration rate.