Of the 11.4 million taxpayers in Australia, 20% have property investments. This has been the result of the different advantages that come with investing in property.
However, new investors may still be entirely unaware of the benefits that entail property funds. Before getting in touch with fund managers in Sydney, there are a few things an individual needs to know to make the correct decisions. Read along to know what property funds are as well as their appeal.
What are property or real estate funds?
Essentially, real estate funds are investments people make into a real estate development company to develop the property. The investors then receive a much better return if the property performs well.
Based on the investment goal, one may invest in one of two types of real estate funds:
- Real estate investment trusts or REITs
- Real estate companies where one directly invests in the developer
The advantages of property funds
Now that we know what real estate funds are and what they do, it is vital to understand why it is a preferred mode of investment for many around the country. Here are five of the significant advantages of investing in property funds.
1. The perfect alternative to buying property
Purchasing property is a time-consuming and tiresome procedure. However, real estate funds offer an effective alternative to physically purchasing real estate. It not only reduces the risk of buying property that could very well be laden in dispute, but it also offers returns without the added effort of maintenance.
2. Protection against inflation
Inflation is the reality of the world today. With inflation, prices of essential items often overshoot, and so do rent and real estate prices. This increases the value of the units of real estate investment. Hence, property funds are excellent protection against inflation.
3. Liquidity
Physical property is difficult to liquidate. Even the most profitable plots might take months to sell. On the other hand, real estate funds provide investors with a level of liquidity that tangible real estate does not. Investors can cash out on their investments at any moment, with the ability to sell them within a very short span of time.
4. Portfolio diversification
Another advantage of real estate investment is the opportunity for diversification. The correlation between real estate and other main asset classes is low and, in some circumstances, negative. This means that including property funds in an already diversified portfolio can reduce volatility and offer better returns.
5. Low investment
Due to ever-increasing expenses, most individuals are unable to own property. A real estate fund allows consumers to participate in this industry without paying hefty amounts of money. In fact, people can invest amounts, small or big, according to their level of comfort.
Wrapping up
Real estate is a relatively low-risk investment. It does have its drawbacks. However, it is far less complicated and palatable to even the most inexperienced investor. It can also add to an investor’s portfolio through its risk-and-return profile.
In addition to being a far cheaper alternative to buying property, it also protects the investor against inflation, offers better liquidity, and lowers volatility through diversification. Further, it offers risk-adjusted returns.
So get in touch with a property fund manager in Sydney today for a professional opinion. An investment is somewhat risky, and having professional insight can make this process less intimidating.
