Real estate or REITs (FIIs): which is the better investment?

In short: There’s no single right answer — it depends on your profile, capital, and goals. REITs (FIIs) offer liquidity and diversification with a lower entry ticket. Physical property offers control, inflation protection, and, in markets like Florianópolis, appreciation above the national average. In 2025, with high benchmark interest rates (Selic), FIIs lost value while physical property in the city appreciated 9.44%.

What is a FII

A Fundo de Investimento Imobiliário (FII) — Brazil’s real estate investment trust — is a fund that invests in commercial properties, shopping centers, logistics warehouses, corporate office floors, or real estate debt securities. Shares (cotas) trade on the B3 stock exchange like stocks. Investors receive monthly dividends — tax-exempt for individuals holding less than 10% of a fund with 50+ shareholders.

Physical property: pros and cons

• Pros:
  • Full control over the asset (renovation, use, sale)
  • Real appreciation plus rental income — gross return in Florianópolis: ~16% per year (2025)
  • Inflation protection: price and rent are indexed
  • Financing available (leverage)
  • Captures the regional premium — a hot local market
• Cons:
  • Illiquidity: a sale can take 30–90 days
  • High capital concentrated in a single asset
  • Active management required (or delegated to an agency)
  • Transaction costs: property transfer tax (ITBI), deed, registration (~3–4% of value)

FII: pros and cons

• Pros:
  • High liquidity: sell shares in minutes on the B3
  • Diversification with a lower entry ticket (from R$100)
  • Monthly dividends, tax-exempt for individuals
  • Professional management — no maintenance concerns
• Cons:
  • No control over the underlying asset
  • Share prices sensitive to the Selic rate — fell in 2025 as rates rose
  • Doesn’t capture appreciation in specific areas like Greater Trindade
  • Risk of poor fund management

What happened in 2025

With the Selic rate high in 2025, FIIs lost value — investors shifted to fixed income. Meanwhile, the physical market in Florianópolis appreciated 9.44%. Anyone holding a well-located physical property in the city protected their capital and kept collecting rent. The drop in FII values didn’t reflect a real estate crisis — it was the effect of high interest rates on financial markets.

What about 2026?

With the Selic expected to fall, FIIs tend to recover — buyers of discounted shares could capture the upside. Physical property in Florianópolis continues to see structural demand, independent of the Selic rate.

How to decide

• Choose FIIs if: you want liquidity, are starting out with limited capital, prefer diversification, and don’t want to manage a property
• Choose physical property if: you have capital for the down payment plus transaction costs, want exposure to the Florianópolis local market, are seeking long-term protection, and can accept illiquidity
• Combine both: many investors hold physical property in strong markets (like Florianópolis) alongside FIIs for diversification and liquidity

Related questions

• Is it worth investing in real estate in Florianópolis?
• What is the rental yield in Florianópolis?
• Which Florianópolis neighborhoods appreciate the most?
• How do I calculate the return on a rental property?

Want to review a real estate investment opportunity in Florianópolis? Talk to Regente.