Property Investment Funds

steveo999

I mentioned on the property forum how I would like to get started investing in property and someone suggested looking into property investment funds.

I dont know where to start... can anyone offer any advice or where to look to find more information about this?

Has anyone had any success?


Thanks,

dunstonh

I dont know where to start... can anyone offer any advice or where to look to find more information about this?

Property funds tend to come in two types. Bricks and Mortar and property shares. Bricks and mortar funds are lower risk and property shares are higher risk.

You then have regions such as UK, Europe and Global. Expect to see more country specific funds launching as well.

Bricks and mortar funds invest in the actual property and the return is the rental income and property price growth. Property share invests in the shares of property companies. That offers higher potential for growth but higher volatility.

The fund managers are currently signalling that they expect UK property funds to underperform next year with Morley stating only 2% growth (compared to 15% a year for the last few years).

As for anyone having success thats just about anyone who has had one. My own portfolio has two European unit trust Property funds, a global property SICAV, a bricks and mortar commercial property unit trust and a UK property share UT.

EdInvestor

Property funds are available in pensions ( the biggest selection, almost every insurance company has one), unit trusts and investment trusts (bought like shares.) As of early next year there will also be a new way of investing in property called REITS (Real Estate Investment Trusts).

Because of the REITS there should be lots of articles in the personal finance sections of the press over the next couple of months, which should provide a good overview about the options and updated info about the outlook.

Traditionally commercial property fund returns have consisted mainly of a dividend in the 6-7% range (from the renatl income on the buildings) plus smaller capital growth, say 10% overall.

But in recent years there has been a flight to the sector because of the stockmarket crash, pushing prices of property up and yields down.So in recent years the return has been more like 5% dividend plus 15-20% growth. :)

Nobody however expects this outperformance to continue: rather the market is expected to go rather quiet for a while ( rather like the residential market in 2004-5). The dividend return will continue of course, capital growth is likely to resume at a less frenetic pace.

So IMHO the sector is likely to continue to provide good stable returns in the long term, for a lowish risk return - higher than cash and often better than bonds and the poorer class of equity funds. Property funds can be held in an ISA.

steveo999

Do you know any sites where I can do this and find more information?

EdInvestor

General guide


Some info on property investment trusts