Investing in Property Funds, is It a Good Idea?

Reluctantpensioner

You may want an IFA.

Your original post seemed to say "I don't get stocks and shares, but I know my I've made money on my house - so I'm thinking of investing in what I know". This could be mistaken: you know your house, you are not a property developer. Property funds are complex: with some strange characteristics. The returns can be surprisingly moderate. Especially compared with equities.
If you research recommended portfolios you will see allocations of a maximum of 0% to 15% in property. At this moment you'll find quite a lot of people advising a blanket "stay out of property".

One argument is: "you have a property already?. And this is over half your total assets? So why would you put even more in one sector?".

A big issue with property is liquidity: you can't sell an office block or shopping mall overnight. And it costs a lot to do so. And people inevitably want to take money out exactly the wrong moment: when the market is low. So funds can "freeze" or do other tricks to stop you exiting - you can't withdraw at all, or will get a painful loss.

One time this happened.was 2016. The Brexit decision led to nearly all funds freezing. Look at the graphs, you'll see big kinks in them.
Property is a long term investment and recommended as a small part of a well constructed and diversified portfolio.

BTW: I have 7% in property.
In 2016 I had to wait 18 months to get money out - but I am in for the long term so it wasn't an issue.

DonnaElmore

I think I’ve heard of this when I was seeking the service of a property investment UK company before. So from what I know, property funds can actually be a good source of income for many. It also offers investors the benefit of diversification. But of course, professional guidance and assistance are always recommended if you aren’t familiar with how this investment works. Experts in this field can also help you understand more about this, and determine if it’s the right option for your needs.

Linton

newbinvestor wrote: »

I was going to invest in the TM Residential Property Fund (think it's a fund, not a reit), but the high management charges put me off.

The TM fund actually owns residential property rather than what many property funds do which is to invest in property companies. Managing residential property is expensive - tenants who dont pay, repairs, gaps between tenancies etc etc. If you want to invest in property you cannot avoid this. Buying a fund like TM residential is the nearest you can get to BTL without any of the hassle.


If you merely buy a fund that invests in property companies you are missing out to a significant extent on the whole point of investing in property which is to reduce your exposure to the stock market.

aberlyfid_2000

adding property is a good diversifier ...I (a random person on the internet) would recommend up to around 10%.

the majority of the property funds out there are hold commercial/industrial and student housing investments. The allocation to residential is usually very small.

PRS Reit is one that buys new houses and leases them, mostly outside of london.
UandI PLC regenerates land with reisdential flats
and there's also RDI Reit

claire21

Can I just ask why isn’t your first thought buying a house for you and your daughter ?

thickasabrick

Take a deep breath, count to 10 and stick to your plan, it's a good one.

Stay away from investments that lock your money away until you've had time to adjust to being debt free.

You will be surprised at how quickly you start accumulating money just being debt free. All that money that previously serviced the debt starts to build up in your account.
It's a wonderful feeling, take a little time to appreciate it !

Sure, purchase some REITs in a Stocks and Shares ISA if you want but make sure it is only a portion of your investment as mentioned by some of the other posters on here.


To summarise:

Take your time.
There is absolutely no need to rush to invest your windfall.
Having it sit in your account is perfectly okay.
You will not miss out on "potential massive returns" as there will be another opportunity along tomorrow, and the day after.
There are lots of ways for you to be parted from your money and a neverending supply of people who are quite happy to help the process !!!

Good luck.
P.S.
I found the Escape Artist simplicity portfolio made sense for me.
The Simplicity Portfolio

https://forums.moneysavingexpert.com/showpost.php?p=76297796&postcount=69

smashy wrote: »

Hi guys, thank you so much.

So I have been thinking a lot about this and my new strategy is:

- Pay all my debts and be debt free
- Continue to rent a house to live
- Educate myself on investments, savings, pensions, funds, ISA's, etc, also find a good financial advisor and invest the rest of my money on those things to make the money grow
- Because I am debt free, I'll be able to save more money per month and put into the investments
- Then in the future at the right time buy my own house with a lower interest rate

Is this a good plan?