Real Estate Investment strategies are both lucrative and satisfying. As a potential investor, one must be aware about the opportunities of the Real Estate Investment. The Initial Investors must be quite skillful, confident and potential in their journey of real estate.
Investing in Real Estate is one of the leading ways of generating income and protecting wealth. There are multiple ways in which an investor can own or buy Real Estate. Some of them include:
- Real Estate Partnerships
- Direct Individual Investment
- Real Estate Investment Trusts
- Real Estate Investment Funds
In this blog post we will take a look at the basics of Real Estate Investment funds, benefits and how does it differs from REITs.
WHAT DO YOU MEAN BY REAL ESTATE INVESTMENT FUND?
A Real Estate Investment fund is more or less like a mutual fund in which a combined source of capital is used to purchase Real Estate Investment assets. Investors go for such funds in order to diversify their portfolios and expand their empire.
It is an entity formed to pool investor money and basically focuses on investing in securities offered by public real estate companies. It is a particular subset of funds that is focused exclusively on investing in income-generating property. The fund manager is responsible for carefully analyzing all individual opportunities, and then they are executed on using capital from the fund. Talking about their formation and structuring, some funds are for the masses while some are available only to potential investors.
ADVANTAGES OF REAL ESTATE INVESTMENT FUNDS
- ADJUSTABLE – Investment funds allows investors with great deal of flexibility in purchasing the property of their choice. This provides the investors with the options to customize their portfolios and move ahead in the direction they have decided for.
- BENEFICIAL – They are subjected to return profit to the aspiring investors prior to profits earned by the sponsors the common interest of both the sponsors and the investors are maintained.
- TAX GAINS – Through these funds investors are allowed to be taxed on long-term capital gains as most of the funds lasts for more than one year.
- EXPANSION – They let the investors to broaden their scope by reaching every parameters of the real estate. They can easily diversify their portfolio by tackling every risk.
- HIGHER PROFIT – The investors are also given an absolute profit that is higher than the preferred profit. Every investors receives their share of profit.
THE KEY DIFFERENCE BETWEEN REITs and REAL ESTATE INVESTMENT FUNDS
The Real Estate investment funds and REIT shares a point of commonality as they are both pooled sources of capital used to invest in real estate. Let us see what difference they hold. A real estate investment trust (REIT) is a organization or corporation that invests in income-producing real estate. They must distribute 90% of their taxable income to shareholders to maintain their tax-advantaged status with the IRS and pay out regular dividends. Whereas The Real Estate investment Funds are the types of mutual funds that provide returns to the investors in the form of capital appreciations and do not comply with any of the rules as stated above.
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