Residential And Commercial Real Estate Funds Dominate Sector

On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporation posted in Commercial Real Estate on Thursday, August 16, 2012.

A real estate fund is a mutual fund which invests mainly in mortgages and real estate. The purpose of the fund is to produce income and capital gains for its investors. Real estate funds in California and elsewhere invest in residential, as well as, commercial real estate. These funds have historically been dominant in the real estate sector; however, many are speculating that its sector dominance could be nearing an end.

In the last year, the real estate funds in the U.S. returned an average of 37.44 percent annually, which leads all sector categories. Also, in the past three years, real estate funds bested its closest competitor in the sector by 21.63 percent annually. Global real estate funds reported an average annual return of 19.58 percent, which leads the global real estate sector.

Despite their historical successes, some experts suspect that real estate funds may not be able to keep up their sector dominance, due to a large amount of real estate investment trusts. This is largely due to the fact that a large portion of the real estate funds consist of real estate investment trusts. Investors question whether the common strategy used by real estate investment trusts of low interest rates, supported by subdued inflation is a strong foundation for investment over the long run.

No matter what type of entity is purchasing commercial real estate, it is always a good idea to do thorough research into the market before making the investment. This type of investment can be quite profitable or it can backfire and cause significant loss. Also, purchasers in California or elsewhere, should make sure to understand all applicable real estate laws governing the transaction. It would be unfortunate if a loss was caused by a simple oversight in a contract.

Source:, "3-Year Run: That's How Long REIT Funds Have Outperformed, But Can They Continue?," Paul Katzeff, Aug. 10, 2012

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