What is a real estate investment fund?
An investment fund is an entity formed to pool investor money and collectively purchase securities such as stocks, bonds, or real estate. A real estate investment fund is a combined source of capital used to make real estate investments.
Real estate investment funds share some similarities with real estate investment trusts (REITs); they’re both pooled sources of capital used to invest in real estate. However, there are some key differences between them, including the fact that REITs are corporations that must distribute 90% of their taxable income to shareholders to maintain their tax-advantaged status with the IRS. Real estate funds don’t have to comply with those rules, so many earn returns for their investors via capital appreciation instead of just dividend payments. Meanwhile, most real estate investment funds tend to be much more diversified than REITs, which typically focus on a single property type (e.g., residential REITs and retail REITs).
