A guide to property investment funds—and are they good investments?
16 January, 2024
Jumping into property investing can seem exciting at first, but a couple of hours of exploring the sea of available investment options will exhaust even the savviest of Googlers. Do you go it alone? Do you invest with friends and family? Or—as many Australians are beginning to see as a smart avenue to build their wealth—do you consider investing with experts in a property investment fund?
Managed property funds, particularly those in the Australian market, offer an accessible and hassle-free way to enter the real estate investment market.
Sure, we’re biassed; we’ve offered unlisted property trusts to Australian investors for over a decade. But for good reason: our investments have helped hundreds prosper, with some opportunities even doubling investor capital.
So here, we’ll explore the benefits of managed property funds and delve into the types of Australian property funds available to you, helping you understand which one aligns best with your investment goals.
Benefits of a managed property investment fund
Low hurdles, high potential return
- Ease of access: Unlike traditional property ownership, managed property funds offer a hassle-free way to access commercial properties without the associated responsibilities. These investments contain high-price tag assets, such as office buildings and large warehouses, which are typically unattainable for most who wish to invest alone.
- Potential higher return: The benefit of owning a larger, premium property, is that the tenant—the lifeblood of the property—has a higher propensity to pay a higher premium. That means, in comparison to smaller investments that a huge chunk of investors could perhaps easily invest in, a higher rental income is likely to be generated for the property owner.
Consistency and diversification
- Monthly income payments: Some property funds, like us, offer investors monthly income distributions, paying consistent income directly to your bank account. For those prizing regular cash flow, this is a huge benefit of investing with a property fund.
- Diversified income stream: You might own shares, residential real estate, bonds, or even have money sitting in a term deposit. The income from those ventures might be relatively secure, but it’s the diversification that an investment like commercial real estate adds to your portfolio that safeguards against a range of market and economic fluctuations.
Become a commercial property owner
- Access unique opportunities: Going in it alone might only open you up to so many opportunities. But by pooling your funds together with other like-minded investors, you can access commercial properties that may be out of your price range as a sole investor.
Peace of mind:
- Consistent performer: Australia’s best performing managed property funds have a solid track record of consistent performance over more than a decade. By investing with a property fund with a solid track record of investment and a large database of satisfied, loyal investors, you can trust your investment is safe.
But of course, just as we perform a thorough due diligence on every property we invest in, you should ensure you research any potential property fund before handing them your hard-earned capital.
Types of Australian Property Funds
There are two major types of property funds that Australians have historically invested in. Both have their merits and their considerations. Here they are in a nutshell:
1. Australian Real Estate Investment (A-REITs)
- Accessibility: A-REITs are listed on the Australian Securities Exchange (ASX), making them easily accessible to investors with a low entry capital.
- Liquidity: They can offer high liquidity, allowing investors to sell their stakes quickly.
- Volatility: As they are stock exchange-listed, and are not immune to market and economic headwinds, A-REITs can be impacted by broader share market volatility.
2. Unlisted Property Funds
- Direct investment: Unlisted funds involve direct investment, bypassing the stock exchange and putting your capital safely in the hands of trusted experts. The best thing is, you can contact these experts directly; something that can’t be done for the owner of an ASX-listed firm with which your money is invested.
- Distributions: Unlisted property funds provide both ongoing income (in the form of regular distributions) and potential capital growth where the property investment strategy allows it. Check out our investment opportunities to see what we’ve offered investors.
Wholesale vs. Retail
Between unlisted property funds and A-REITs, a further subcategory available to Australian investors are wholesale funds and retail funds.
Wholesale Funds typically require higher upfront capital, often with a minimum investment of at least $100,000 or more. Investors need to meet specific criteria, as follows:
- Have assets of at least $2.5 million; or
- Have had an income of at least $250,000 per annum over the past two years; or
- Control a company or trust which meets the requirements of either item 1 or 2 (above); or
- Invest over $500,000 into, say, a Properties & Pathways syndicate.
Retail Funds, on the other hand, are more accessible with lower minimum investment requirements. You’ll be one of potentially hundreds in one single investment. And while you might be able to speak to a customer representative, you’ll rarely (if ever) speak to those responsible for making the investment decisions.
The bottom line, choosing the right property investment fund depends on your financial goals, risk tolerance and investment preferences.
Whether you go for the accessibility of A-REITs or the stability of unlisted property funds—where you’re treated as an owner (not just another investor)—understanding the nuances of each option is crucial for making informed investment decisions in the dynamic Australian real estate market.