All About Investment Trusts

Investment trusts are a key tool for those looking to invest in real estate without having to buy or manage a property themselves. That’s why at Inversur Propiedades® we believe it’s important to know about this alternative.

In this article, we’ll give you detailed, up-to-date information about investment trusts, their features and benefits, as well as some useful tips for investing wisely in the Chilean real estate market. We know this can seem like a complex topic, but we promise that with our guide you’ll be able to understand it easily and make informed decisions.

Features and benefits of investment trusts in the Chilean real estate sector

Now that we’ve introduced real estate investment trusts, it’s important to highlight some of their most relevant features. First, these instruments let you invest in real estate through a trust system, that is, using an independent entity in charge of managing the resources and properties.

Another interesting aspect of trusts is their high liquidity, since their shares can be easily bought and sold on the financial market. Also, unlike buying a property directly, risk is diversified since there are several assets within the trust’s portfolio.

But the advantages don’t end there. Real estate funds also offer an attractive return compared to other investment options available on the Chilean market. In fact, some experts believe this type of instrument can offer stable, secure returns for investors interested in the long term.

In short, trusts are an excellent option for those looking to get into or diversify their portfolio within the Chilean real estate sector. If these financial alternatives interest you, we invite you to learn more details about how they work and the best ways to invest in them.

What is an investment trust

If you’re interested in investing in the Chilean real estate market, you’ve probably heard of investment trusts. At Inversur Propiedades, we’re experts in this type of financial instrument, and we want to explain what they are and how they work.

First, it’s important to know that investment trusts are an indirect way of participating in the real estate market. This means that when you invest in a trust, you don’t directly acquire a property or land, but rather you buy “shares” of the financial instrument.

How does this work? Imagine a trust wants to build an office building. To do this, it needs money to buy the land, hire architects and builders, and carry out the entire process until the finished building is delivered. Instead of asking a single investor for all that money (which would be very risky for the trust), it decides to divide the property into equal parts and sell them as if they were shares.

This way, anyone can invest without needing to have a lot of capital available. Also, by acquiring a share of the trust, you get rights to the income generated by the property (whether from rent or from an eventual sale).

Another important aspect of trusts is that they’re regulated by specific rules, both nationally and internationally. So, you’ll have the security and transparency needed to make informed decisions.

In short, investment trusts are an interesting option for investing in the Chilean real estate market without needing to acquire properties directly. If you want to know more about how they work or what options are available, don’t hesitate to contact us at Inversur Propiedades. We’ll be happy to help you.

Benefits of an investment trust

When it comes to investments, trusts are an excellent option. These financial instruments have become increasingly popular in the Chilean real estate market due to their many benefits.

First, investment trusts allow for the democratization of the market. What does this mean? That anyone can invest in real estate without needing large sums of money. Through trusts, you can acquire small shares proportionally represented by units that grant rights and responsibilities over the fund’s assets.

Also, another advantage is that trusts offer greater liquidity than direct investment in real estate. If you need to make withdrawals or want to sell your shares, there will always be interested buyers and a fair price determined by the market.

Another important benefit is diversification. When you invest in a trust, your capital is spread across several different properties managed by experts with a long track record in the Chilean real estate sector. This significantly reduces the risk your money is exposed to.

Finally, there’s a very important tax advantage when it comes to these financial instruments: dividends (income generated from rents received) are exempt from income tax for non-resident investors.

As you can see, there are many reasons why you should consider investing in investment trusts. It’s not just an accessible, diversified option — it also offers greater liquidity and tax benefits. On top of that, investing in real estate can be very profitable in the long run.

How an investment trust works

In the real estate world, investment trusts are a popular tool for investing in properties without having to manage them directly. As we’ve already explained in previous sections, a trust is a contract through which a property’s owner grants a financial institution (the trustee) the administration and management of the property. In exchange, the institution commits to distributing the benefits generated by that property among the investors.

As we mentioned in our previous article, there are two main types of trusts: REITs and Ficres. REITs are Real Estate Investment Trusts that trade on the stock exchange. They work like shares and offer investors high liquidity. On the other hand, Ficres are private trusts that don’t trade on the stock exchange and are usually aimed at specialized investors.

The returns obtained from a trust can vary: from the monthly rent obtained from leasing the property to the appreciation generated by its later sale. The added value this tool offers is based mainly on the professionalization of asset management; that is, the team in charge of the fund seeks to maximize profits for its investors.

Although investing in these financial instruments may seem simple, it’s always worth doing proper research before investing. It’s advisable to research the track record and experience of the team managing the fund, as well as the specific risks associated with each trust. This will let you make an informed, well-grounded decision.

Requirements for setting up an investment trust

If you’re interested in investing in real estate, investment trusts are an excellent option. But how do you set one up? Here are the main requirements.

First, you need to have a trust administrator. This person will be in charge of carrying out all operations related to the trust and looking out for your interests as an investor. Make sure the administrator has experience in the real estate sector and a good reputation.

You’ll also need to choose a trustee, which is the entity in charge of creating and managing the trust. The trustee must be authorized by the Superintendency of Securities and Insurance (SVS) to operate in Chile, since this guarantees it complies with the necessary regulations.

Another important requirement is defining the trust’s purpose. This means specifying what its main function will be: buying properties for rent, remodeling existing buildings, building new real estate projects, or any other specific goal agreed upon among the investors.

You’ll also need to set a specific term for the trust and decide how profits will be distributed among the investors. It’s also necessary to define who the trust’s beneficiaries will be and how their rights to it will be divided.

Finally, it’s important to have an appraisal report for the properties that will be included in the trust. This report must be done by an appraisal expert and guarantees that the investment will have a solid foundation.

These are the main requirements you should consider if you want to set up a real estate investment trust. Always remember to seek professional advice to ensure a successful investment.

Risks associated with investment trusts

When investing in an investment trust, it’s important to keep in mind the risks involved. These aren’t just related to the Chilean real estate sector — they’re also present in any other type of investment.

First, it’s important to keep in mind that property prices can fluctuate due to external factors like the country’s or the world’s economic situation. This can directly affect the fund’s value and, therefore, the investment’s return.

On the other hand, there’s also liquidity risk. That is, if you want to sell your shares in the trust quickly to get liquidity, you may run into difficulties if there aren’t enough interested buyers at that moment.

Another risk present in investment trusts is operational risk. The fund’s administrators can make mistakes or wrong decisions that negatively affect its performance.

Finally, we can’t leave out legal and regulatory risk. It’s important to make sure the trust is properly structured and complies with all corresponding regulations and laws to avoid legal problems or arbitrary penalties.

In short, before investing in an investment trust, you should be aware of the possible risks associated with this type of investment. We recommend thoroughly analyzing the trust and its legal structure, as well as closely following the market’s evolution to make informed real estate investment decisions.