How do property investment funds work?

Property investment funds are a trust fund that has an investment portfolio made up of rental property, the rents from which are what grows the fund and provide a return on investment. The investment fund is a managed fund under the control of a trustee. The trustee is the individual or group that is responsible for providing management of the property assets so that the investment gives a steady return, allowing the fund to pay dividends and grow.

One of the keys of successful property investment funds is the makeup of the portfolio; funds which favor commercial rather than residential properties often perform better because when the property is leased to a commercial tenant it is normally a long lease which in turn provides consistent and predictable income for the trust. This is important as the investors in the fund are looking for a steady income from their portfolio. As the reserves of the fund increase, this money can be used to purchase additional real estate, which then generates more income for the investors. The idea of well run property investment funds is that they provide an acceptable return on investment without the need to sell any of the properties in the fund to meet this obligation.

Depending on where the fund is established the income from the fund may or may not be taxable. In some jurisdictions there is tax to be paid but only if the income exceeds a specified amount in a specified period, such as a calendar year. The tax tables that are used to calculate the tax on the income is often a different set of tables used to calculate the tax for other forms of income. The tax on income from this type of trust fund is usually lower than the tax due from other investment income.

As with all investments, the portfolio is managed to provide retirement income or income to a loved one. The long term success of this type of investment lies in the type of properties held by the fund. As an investor in property investment funds you must be prudent and continue to evaluate the performance of the fund. If the income begins to erode it could be that the properties are beginning to require significant repair and upkeep.

When you have property investment funds available and you are actively looking at rental property as a necessary part of your portfolio then you may wish to consider contacting Real Time Investments Ltd.