It goes without saying that property investing is one of the most lucrative and worthwhile investment that can be considered when building net worth. To add, it’s a simple formula – loan money from the bank, buy property, rent it out, and let someone pay off your debt. Lest it be forgotten, however, buying a physical property (especially investment or commercial) can be very expensive, and is nothing more than a dream for most people. The property market is susceptible to market fluctuations like most investments, however it has consistently proven itself, claiming a significant stake in most high net worth individual’s (HNWI) portfolios and those regular investors like you and I.
And so comes the introduction of Property Funds, buying into a unit of the fund which is pooled with others investors’ contribution and the fund manager uses the money to invest in property securities or property that they believe be to be good investment picks; and so the investor becomes an indirect owner of properties such as shopping centres, industrials, hospitals etc. How the fund then makes money is simple: The fund earns rent from tenants (for short-term investors); the properties gains value over time (for long-term investors); or the fund can also re-invest the rental income in more properties for growth of the value of the fund. If the fund is listed, the dynamics change slightly (and article for another day).
Property Funds generally perform well, regardless of the management company ranging from Coronation to Prudential. As an example of performance, the Investec Property Equity Fund (Class H), measured over a year, has given a 26.38% return, which is higher than normal returns of the most aggressive unit trusts outside property.
This type of fund makes way for you to invest in property without the burden of being a landlord, and is very easy to start (about as easy as opening a bank account).
This is all in the breath of building net worth over the long term that will pay off well in the end. The property market is growing and diversifying the products offered to investors. It is always advisable to engage in proper due diligence or research to gain sound understanding of exactly what you are investing in. Retaining the services of a financial advisor or broker is an advisable option, although more costly, it’s a safer bet than just winging it out there on your own.