Real estate mutual funds are a type of investment made up of securities, usually stocks, of companies that purchase real estate with money collected from investors. Factors affecting the return of real estate mutual funds include the real estate market in general, housing starts, residential and commercial vacancy rates and interest rates.
Real estate mutual funds “tend to focus their investing strategy on real estate investment trusts (REITS) and real estate companies.” REITs are companies that buy and manage real estate with funds collected from investors. Real estate companies run the gamut, from firms that sell real estate to firms that support real estate ventures, like real estate software providers and property management companies. A real estate mutual fund can include shares of stocks in a number of REITs and in a number of real estate companies.
If you decide you’d like to invest in real estate mutual funds, do your research first. Use online stock screeners to find funds specializing in real estate. Look at the funds’ track records: see how they have performed over different periods of time. Read the fund’s prospectus, a report covering all the basics of a fund: who runs it, what the fees are, what the minimum investment amount is and what individual companies the trust owns. The prospectus will also describe the level of risk associated with the fund and define the fund’s goals.
Investing in REITs and buying property yourself are the two obvious alternatives to real estate mutual funds. REITs are a good transition into actually purchasing investment property; you can actually go visit properties the REIT owns and read expense and income statements for them. One way to begin with your own rental property is to buy a new home and turn your former home into a rental rather than selling it; this way, you’re already familiar with the expenses and taxes owed on the property, and can set the rent accordingly.
Real Estate Funding Solutions wants to help you in your search for real estate mutual funds. Visit us on our website at www.realestatefundingsolutions.com or give us a call at 1-855-913-8637 to let us help you get started!