Real Estate Funds 101: The Basics

Real estate funds are primarily limited partnerships between investors and project developers that focus on improving existing properties or land.

Initial Deposit

Risk Level

$25,000

Aggressive growth

Public REIT
(Over 10 years)

$32,500

Cash Distributions
(Over 10 years)

$0

Traditional Investing
(Over 10 years)

$38,750

This chart shows the impact of compounding - actual returns will be different. We've assumed the market interest rates will go up by an average of 5.5% respectively. We used real estate fund data from both FTSE NAREIT Real Estate Equity REITs and NCREIF total returns. All data is as of December 2018. Investing in real estate is considered risky and historical performance of real estate return data should not be considered as a guarantee for future performance.

What is a real estate fund?

A real estate investment trust, or REIT, is a company that owns real estate. Most REITs purchase large-scale properties, such as commercial buildings, healthcare facilities, shopping malls, hotels, and other specialized properties.

As an investor, you can choose to invest in either a public or private REIT. In both cases, you would receive your income through payouts made by the company, based on the revenue earned from the properties it owns. 

A private REIT is not traded on a public exchange, such as the Toronto Stock Exchange, and is sold to investors through specialized brokers/companies in the exempt market. These are generally riskier investments than their public counterparts, which means you must meet certain eligibility requirements prior to investing.

Real estate investing is risky, there is never a guarantee, and can result in the loss of invested capital.
An illustrative example of real estate fund distributions. Initial deposit of $25,000. Annual cash flow of $0. End of project (ex. year 10) of $60,000 (14%)*.

How do these funds work?

Every company that manages a private REIT makes bets on the right locations for the long-term. The most common factors that guide their strategy are based on:

Experienced Management
A strong private REIT always starts with a seasoned management team with decades of real estate investment experience. Based on their understanding of the market, they determine the best strategic decisions for their fund.
Due Diligence
Private REITs are vetted through a rigorous due diligence review with a team of experts, including assessments of real estate properties, financial underwriting details, and the execution strategy.
The Opportunity
All relevant due diligence materials and legal documents are sent to interested investors – who must make their own informed decisions. Companies will collect your funds and start your investment term.

How can you start?

01

Learn

Do your research

Make sure that you meet the eligibility requirements. You can read more here.

02

Choose

Pick a Project you like

Review the prospectus, terms, and contact the company that you believe will succeed.

03

Invest

Invest a small amount

Plan to diversify, which means investing in small amounts to lower your overall portfolio risk.

04

Wait

Play the long game

Receive updates and enjoy passive returns until the completed term or re-invest.

Read next

Learn more about investing with real estate funds

Sign up for our educational newsletter and learn about future investment companies as we announce them.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.