Investing in real estate funds

A real estate fund (REIT) is a fund that invests money from investors in buildings, land and a variety of other real estate properties. The fund thereby generates income by renting or eventually selling these properties and focuses on building profit in the long term.

As long as the (rental) prices of houses, office premises and other buildings rise, the fund can realize profits in the future when they are sold. Investors buy shares in the fund and benefit from the performance of the real estate portfolio. This makes a real estate fund an attractive way to invest in real estate without directly managing real estate yourself.

Differences in real estate funds

Real estate funds often specialize in specific types of property or certain projects. Some funds invest exclusively in retail properties and shopping centers, while others focus on (residential) houses, offices or even providing mortgages. This specialization determines the fund's focus and potential returns.

When choosing a real estate fund, it is important to look carefully at what sector is currently popular and what the expectations are for that type of property in the future. For example, if many people choose to work from home, office properties may become less occupied. This makes it less attractive to invest in a fund that focuses specifically on offices. It is therefore essential to consider market trends and future developments when making your choice.

By understanding what a real estate fund invests in and what sectors it supports, you can better determine whether the fund fits your investment goals. An informed choice will help you take full advantage of growth opportunities in the real estate market and effectively diversify your investment portfolio.

Cost of a real estate fund

Real estate funds are actively managed, which typically carries higher costs than ETFs, for example. This is because fund managers and other staff must be paid. Annual fees can be as high as 2.0%. It is wise to check these costs carefully before investing.

The risks of investing in real estate funds

The return of real estate funds is closely related to developments in the real estate market. Falling house prices and high vacancy rates can cause a real estate fund to make a loss. Historically, real estate prices can suddenly fall sharply, but in the long run, there is often an upward trend. For example, compare housing prices 30 years ago to today. Although the past shows positive results, this does not guarantee future success.

With unlisted real estate funds, sometimes you cannot easily sell your investment. This can be a risk, especially if the fund suffers a loss and you can't get your money back quickly. Make sure you understand how and when you can sell your shares so you don't run into unexpected problems when you want to end your investment.

Some real estate funds use borrowed money. This carries additional risk. If interest rates on loans rise, the fund incurs higher costs to pay off debt. This affects the fund's profits and returns. This can also jeopardize your investment. Again, do good research on the real estate fund before buying shares.

Alternative to investing in real estate funds

A REIT invests in several real estate projects, so you have little influence over the specific investments. However, if you want to decide what you invest in, real estate bonds are an attractive alternative. With real estate bonds, you get the benefits of a REIT, such as real estate returns and the security of the underlying value, while maintaining control over which projects you want to support.

Whether you prefer the broad diversification of a REIT or the control and security of real estate bonds, there are several ways to invest in the real estate market. Choose the option that best suits your investment strategy and financial goals, and build a balanced and successful investment portfolio.

Do you have questions about real estate bond options or want to learn more about our projects at Valvest? Our team is ready to help you make the right choice for your financial future.