Why investing in property funds is a good idea

Why investing in property funds is a good idea

The vast majority of people are aware that it is not a smart move to put all the money you have in one company or in just one kind of investment. Apart from the risk of having all your eggs in one basket, the fact is that you might lose some great opportunities in other investments and companies. So, besides investing in bonds, saving accounts and in stocks and shares, it is highly recommended to invest tin property funds too.

If you are a homeowner, then property funds will give you the opportunity to reap the benefits from the increasing prices of residential properties. And, if you want to use the advantages of diversification even more, investing in commercial property could be worth considering. Property funds purchase commercial properties including retail parks, offices, shops and warehouses in different parts of the UK and all over the world. They can sometimes make investments in residential property and in some cases they are involved in developing properties too.

Property ISA/OEIC

Once you make an investment in a property ISA or OEIC, the money you’ve invested is used for buying units and shares in the fund. This investment is funded with the money from other investors as well and with the help of a fund manager, the money is invested in property. After that, the fund generates income from rent paid by tenants. In many cases, the properties boost their value over a period of time so you benefit from capital gains as well as rental growth.

Property funds often re-invest the income that comes from renting in other properties. A fund manager with good experience and knowledge of the industry will identify the most appropriate investment opportunities and buy promising commercial property at the best price. They will do this at the most appropriate time and in the right location.

So who should invest in property funds?

First of all, investors in pursuit of long-term growth and expansion and diversification will find this investment quite profitable. In addition, investors who want stable income will be attracted to property funds. Investing in property funds is also great for investors who want to add some diversification to their investment portfolio in general.

Property funds are perfect for investors who want steady income and long-term, stable growth. They provide the benefits of putting your money in property without having the landlord’s responsibilities. So, these funds can serve as an excellent diversification tool and open the gates of markets that you can’t invest in individually. Even though there is no strict minimum investment period, it’s worth pointing out that medium-term and long-term investments tend to be the best (five or more years).

Just like any type of investment, investing in property funds comes with a few risks. For example, no one can guarantee that the value of properties won’t drop and the same goes for rental growth. However, the advantages often exceed the disadvantages which means that for the vast majority of investors, investing in property funds is a smart idea.