There are actually many ways to invest money to make it grow. People are looking for businesses that allow them to keep their money safe but active and dynamic in the world of economy. One good option is real estate investment fund.

A real estate investment fund invests in real estate assets, so instead of buying shares of a company, it will either buy a vertical condominium in a certain location or do it indirectly through other companies that invest in real estate assets.

It is a collective investment vehicle that allocates the money of its participants to investment in real estate, with which it obtains profitability through the rental or revaluation of assets, or in listed companies operating in the real estate sector.

Lic. Oscar Jimmy Jiménez Bastos, MBA, Regional Manager, Operations Management, BCR.

Types of funds

Direct Funds

They invest in real estate. That is, real estate that is anchored to the land and cannot be moved. Examples are buildings, warehouses, land, etc. The fund acquires these assets in order to obtain returns through their purchase or rental. Due to the specific characteristics of the assets in which they invest, these funds cannot calculate the daily net asset value of the fund. However, they must provide their investors with a valuation of the fund at least on a monthly basis.

Indirect Funds

They invest in companies operating in the real estate sector.  For example, SOCIMIs (Real Estate Investment Listed Corporations), whose objective is the purchase, rehabilitation and development of real estate for leasing. These funds can calculate their daily net asset value, allowing the investor to know the valuation of the fund every day.

Advantages of Real Estate Investment Funds

  • Real estate investment funds are an accessible and simple way to enter the real estate market for the individual investor who is unwilling or unable to acquire these assets individually.

  • In addition, these vehicles provide diversification to a portfolio, gaining exposure to the real estate market in many geographic areas of the world, depending on their investment policy.

  • They also provide protection against inflation, as leases are often indexed to the evolution of the CPI.

Risks of these funds

The investor in a real estate investment fund must consider that the performance of these assets is closely related to the evolution of the economic cycle.

In good economic times, the fund’s performance is likely to be positive, while in periods of crisis, it may be negative and face losses.

It should also not be forgotten that the investor will only be able to check the fund’s valuation per month. Unlike the indirect fund, which offers it on a daily basis.

On the other hand, in the direct funds, the investor must be aware of the need to assume long-term investment horizons in order to avoid repaying the fund at a loss. This is due to situations of illiquidity faced by the fund manager at the time of divestment. These are more frequent in times of crisis, but not impossible in good times of the cycle. It is usually advisable to consider this type of investment with a view to at least 5 years.

In Costa Rica there are banks and other companies that offer the possibility of being part of a real estate investment fund. Taking into account the advantages as well as the risks will help you make a safe and responsible decision to take care of your interests. Being informed about the types of investments that exist will guide you in this process to know which one adapts better according to your resources.

Real Estate Agency
By Tags: Categories: Investment