Have you ever dreamed of investing in Miami’s booming real estate market, but don’t know where to start? Here’s the solution! Real estate investment trusts (REITs) have emerged as a prominent option in this sector.

These allow for diversification by investing in multiple properties. Liquidity is also possible because it facilitates stock market transactions for investors with different economic capabilities (flexfunds, 2023).

How Do Real Estate Investment Trusts Work?

REITs are investment instruments focused on real estate for lease or assignment. They derive from REITs, which invest in properties such as offices, hotels, and residences (Arciniega P, 2019).
In the same way, FIBRA guarantees regular income. Its operation begins with an initial contribution, either monetary or in real estate, from a founding investor. On the other hand, they are established through a business plan and issue participation quotas that can be acquired by other investors (Arciniega P, 2019).

The legal configuration of a FIBRA results from several legal modifications of Mexico’s tax regulations and regulations. In order to establish one, it is necessary to formalize a trust agreement in accordance with Mexican laws. In addition, a credit institution or brokerage firm located in Mexico must be appointed as a trustee (Rodríguez M, 2022).

Benefits of Participation in the Stock Exchange

A FIBRA listed on the stock exchange offers advantages. One of the main benefits is the high potential for return on investment. It also offers the opportunity to enter the real estate market as a viable investment alternative through a Real Estate Trust Certificate (CBFI) that is easily traded and presents a clearly discernible market price (Mejía R, 2023)

Likewise, some investors are not subject to income tax and, under certain conditions, by law. This does not incur tax burdens when carrying out secondary market transactions with Real Estate Trust Stock Certificates (CBFIs) (Fibrainn, n.d.).

Dividend distribution to investors

Real estate investment trusts drive real estate advancement, because it makes it easier for investors to get into this sector. They also contribute to reducing the investment risks associated with real estate by distributing them more effectively (Fibrainn, n.d.).

Parts of the Real Estate Investment Trust Agreement

A FIBRA contract is made up of several essential elements (García G, 2017):

  • Trustee (usually a bank) and settlor (who contributes the assets or rights to the trust).
  • Assets or real estate.
  • The rights and obligations of each party.
  • The conditions and terms for the issuance and commercialization of CBFIs.
  • Provisions on distribution of income, liquidation, and termination of the trust.
  • Clauses on the administration of assets and legal provisions.

Business Models Behind FIBRAs

FIBRAs operate under a variety of business models. One of the most common is the acquisition and leasing of properties. It involves buying real estate and then renting it out, which provides a steady cash flow (Nava R, 2014).
Another model focuses on the development and sale of properties. In this case, real estate investment trusts actively participate in the design, construction and eventual sale of real estate (Nava R, 2014).

Taxation of Real Estate Investment Trusts in the U.S.

If you decide to invest in Miami, there are four key tax categories you should consider (Volz J, 2022):

  • The tax on income and capital gains.
  • Tribute related to inheritances and legacies.
  • The tax applied to corporate dividends and subsidiary profits.
  • Withholding according to FIRPTA and withholding applicable to companies.

In conclusion, real estate investment trusts represent a powerful tool to take advantage of opportunities in the real estate market, without the need to acquire properties directly.

Consider the golden opportunities of investing in Miami, a city with steady growth and an unparalleled cosmopolitan life. Of course, you can research the cap rate, which are important instruments within the subject. Don’t wait any longer!

References

Arciniega, P. (2019, March 11). Application of new business alternatives: Real Estate Rental Securitization Trusts (FIBRA) and Real Estate Rental Investment Funds ( FIRBI). Esan. Graduatte School of business.

Fibrainn. (n.d.) What is a fiber?

Flexfunds. (2023, May 12). What are Real Estate Fibers? How do these financial instruments pay income or dividends?

García G. (2017, September 11). Infrastructure and Real Estate Trusts (FIBRAS) in Mexico. Origin, characteristics and current situation.

Nava, R. (2014, March). Fibers: business of the century. We are industries.

Rodríguez, M. (2022, November 30). Fibers. Revista abogacía.

Volz, J. (2022, July 09). Top considerations and practical tips for foreigners looking to invest in real estate in the United States. Saintjosephgroup.