If you have the urge and the assets, real estate investing can provide excellent returns. Over the past 20 years, real estate has outperformed stocks and, since 2011, real estate has realized twice the return of a similar investment in gold.
But where to start? One popular option is the Real Estate Investment Fund (REIF), which can provide ample returns with a lower risk.
A REIF is money pooled from investors that is used to fund commercial and/or residential properties. The cousin to a REIF is the more well-known Real Estate Investment Trust (REIT), which is a corporation investing directly in real estate and traded as a stock. One key difference between the two is that REIT investing is usually established to yield short-term income for investors. REIFs focus on the long term, providing increased value through the appreciation of the properties.
There are many benefits to investing in real estate through a REIF, including:
Risk Reduction: A REIF invests in different types of properties in various geographic regions. If there is, for example, an economic slump in one region, any decline in property appreciation may be offset by an increase elsewhere.
Expert Control: As an individual investor, we are obligated to stay abreast of laws, economics, and strategies to help us gain a sufficient return. A REIF, however, is managed by people with successful real estate and investing backgrounds.
Higher Quality: Investing in a REIF provides you with access to a higher level of property investment. As an individual, for example, the profitable office complex in Dallas may be a financial impossibility. As a member of a REIF, that property is within reach.
Tax Benefits: REIFs offer tax benefits not available to private investors.

As with any investment, there are risks. To help reduce your risk and make the best possible selection of a REIF, some due diligence is required as there are many funds and varying investment strategies.

Start by determining your financial goals. Do you want a short- or long-term investment? Do you want to invest in real estate for the purposes of a family trust? Are you looking for a trust with a social benefit, such as solar-powered facilities? These are just a few of the of the issues you need to resolve before committing your resources to a REIF.
You will also want to review past quarterly updates and distribution statements to determine performance and return-on-investment. To help, Part 2 of this series includes a list of some of the country’s top-performing Real Estate Investment Funds.
