Why Residential Property Funds are a Popular Investment Choice

Investing is a great money-building strategy. But the difficult part is where do you even begin, is it stocks? Bonds? Or Crypto? And, since I’ve tried all of these, I now know that there’s nothing more lucrative than a proper real estate investment. 

This is especially true when the global real estate market is expected to reach a staggering valuation of $634.90 trillion by 2024. (Source: Statista)

So, if you’re considering adding real estate to your investment portfolio, I’ll be sharing my personal journey with residential property funds. Along with why I believe that it could be a perfect investment choice for you. 

Let’s start! 

Accessibility and Diversification

Buying a property, especially in a desirable location, can be a huge financial commitment for many individuals, which makes it out of reach for many individuals. 

And, this is right where residential property funds come into play, which is like an investment scheme that invests primarily property assets such as houses, apartments, units, and townhouses. This offers much more accessible entry points for potential investors. 

The one thing that I liked most about this investment approach is that, now, I could invest in a number of properties, which I believe can provide me with huge returns in the future. This allows you to gain exposure to a diversified portfolio of properties, which significantly reduces your investment risk. So, if one property in your portfolio underperforms, it will not impact your overall investment. 

For me personally, the diversification and the easy accessibility points were the key factors that led me to explore the residential property funds option. It allowed me to invest in the real estate market, without a major upfront cost or worrying about the risk associated with the single property investment. 

Potential for Solid Returns

Real estate has historically proven itself to be a consistent long-term growth offering investment strategy. The first and probably the biggest highlight of this investment strategy would be the rental income that I receive from the funds. It allows me to use this money for my other expenses or to reinvest in the portfolio to maximize my returns. 

The second most crucial key driver for the return would be capital appreciation. So, as you might know, property values tend to rise over time, this is particularly true in areas of high economic growth and high Opportunities. So, as the value of your underlying property increases, so does the value of your investment in the funds. 

In addition to that, investment hedging is another thing that can greatly affect the value of your fund, especially during inflation. Property value rises during the time of inflation, which provides a hedge against the eroding purchasing power of money. This can be highly beneficial in the current economic scenario, where inflation can greatly affect the value of some traditional investment options.

Do you know? 

According to a study conducted by ResearchGate, residential property investment returns can range from 6.99% to 14.44% with risk returns ranging from 20.92% to 51.54% within the property market. 

Liquidity Compared to Direct Investment

The one major difference between investing in a residential property fund and owning a property directly is liquidity. A direct, ownership involves some lengthy market operations, which include negotiations with the buyers, and also dealing with the legal and administrative hurdles. Moreover, it makes it difficult to sell the property when you actually need the money. 

On the other hand, investing in residential property funds offers greater liquidity, that allows you to redeem your shares from the funds, whenever you need it. 

However, it’s important to note that the liquidity can vary depending on the funds you’re investing in. For instance, some funds have restrictions on redemption in the form of lock-up periods or minimum notice periods. And, this is why it is often suggested to carefully review the fund’s terms before investing your money. 

Increased Market Opportunities

As an investor myself, I know how challenging it can be to gain exposure to a diverse range of real estate markets.  And, if you try to consider all the major factors like location, available capital, and local market knowledge, it can significantly limit your investment options. 

However, with residential property funds, investors can invest in diverse markets across different cities, regions, and even countries.

Affordability of Fund Fees

Residential property funds usually come with multiple charges such as management fees, performance fees, and some other expenses. While these fees can vary significantly across different funds, I’ve found that the overall cost structure of these funds is quite reasonable. This is especially true if we compare it to the potential returns and the services they provide us. 

Wrapping Up 

On a closing note, my personal journey with the residential property funds has been a positive one, providing me with enough relaxation to invest in a growth fund without considering multiple factors like a direct real estate investment. This is also usually coupled with a range of benefits like diversification, accessibility, and professional management, making it a great investment option.

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