Consumers invest in residential real estate funds for the same reason they invest in real estate ETFs and mutual funds; they want to invest in real estate without holding physical property. Residential real estate funds let you do exactly that while also diversifying your holdings based on the type of real estate class each REIT invests in.
Great Diversification
Some professional financial advisors say that they invest for diversification and for the non-correlation with other types of equities. The reliability of the long term data instead of the ups and downs of the real estate market is very appealing. It’s also a great way to gain exposure to real estate without having to be a landlord.
It is highly recommended that investors buy only publicly-traded residential real estate funds as the U.S. Securities and Exchange Commission (SEC) recently warned against non-traded residential real estate funds saying that their lack of liquidity, high fees, and lack of value transparency create undie risk.Â
Key Takeaways
Residential real estate funds are a key consideration when crafting your equity or fixed-income portfolio. The greater diversification along with projected higher returns and/or overall lower risk outcomes makes them a great way to generate dividend income along with capital appreciation. This makes them an excellent counterbalance to stocks, bond, and cash.
Residential real estate fund investors usually or manage income-producing commercial real estate, whether it’s the properties themselves or the mortgages on those properties. You can invest in the companies on their own, through an exchange-traded fund, or with a mutual fund. There are many types of residential real estate funds available.
Within each specific market, investors should look for population and job growth. Generally, when there is a net inflow of people to a city, it’s because jobs are readily available and the economy is growing. A falling vacancy rate coupled with rising rents is a sign that demand is improving. As long as the apartment supply in a particular market remains low and demand continues to rise, residential REITs should do well.
Real Estate Funding Solutions is one of the top recognized mortgage brokers based in New Jersey. We help you with commercial lending, residential lending, fix & flip, as well as many other real estate financial products. Send us an email at info@realestatefundingsolutions.com to learn more.