What's a Real Estate Mutual Fund?

A property mutual fund is a kind of investment made up of securities, usually stocks, of businesses which buy property with money collected from investors. Factors affecting the return of property mutual funds incorporate the real estate market in general, housing starts, residential and industrial vacancy rates and interest rates.


In accordance with moneyzine.com, property mutual funds”tend to focus their investing strategy on real estate investment trusts (REITS) and property businesses.” REITs are companies that purchase and manage property with funds accumulated from shareholders. Real estate businesses run the gamut, from companies which sell property to companies that support property ventures, like property software providers and real estate management businesses. A property mutual fund can comprise shares of stocks in a number of REITs and in a number of property businesses.


Property mutual funds are an alternative to buying investment property, especially in the event that you want to limit your investment, amount of danger and involvement in management. They’re also an alternative to REITs in case your goal is to your own investment to continue to grow; the IRS needs REITs to give all profits back to investors annually, meaning that the profits are subject to federal tax annually. Profit on mutual funds remains in the fund if you don’t market. Property mutual funds, like all mutual funds and unlike property itself, are relatively liquid. You can sell them in one day.


When you have property mutual funds, you have no part in determining what companies are spent in or how they are run. Unlike straight owning stock in a company, you don’t have voting rights on problems having to do with the fund. Your job is diminished in comparison to other kinds of property investment. You don’t get tax benefits like depreciation, even though in the event that you maintain your mutual fund investments for more than a year your profits are taxed at the capital gains rate, exactly like actual real estate.

Next Steps

Should you decide you’d like to put money into real estate mutual funds, do your research . Use online stock screeners to find funds specializing in real estate. Examine the funds’ track records: determine how they’ve done over short-, mid- and long-term intervals. Read the fund’s prospectus, a report covering all of the basics of a fund: that conducts it, what the charges are, what the minimum investment amount is and what individual companies the trust owns. The prospectus may also describe the amount of danger associated with the fund and specify the fund’s goals.


Investing in REITs and purchasing land yourself are both obvious alternatives to property mutual funds. REITs are a good transition into actually buying investment property; you might actually go visit properties the REIT owns and read cost and income statements to them. 1 method to start with your own rental property is to purchase a new home and turn your prior home into a leasing instead of selling it; this way, you’re already knowledgeable about the expenses and taxes owed on the property, and can set the lease accordingly.

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