Definition
The term real estate fund refers to an investment strategy that focuses on securities issued by real estate companies. The objective of real estate funds is to allow investors to participate in the market without directly purchasing properties.
Explanation
Real estate funds offer investors the opportunity to participate in this market by purchasing securities, such as equities, offered by real estate developers. These companies can build, purchase, and even manage both commercial and residential properties as well as land.
A real estate fund can also invest in real estate investment trusts (REIT), which is a corporation that owns or finances income generating properties. REITs allow investors to pool their resources, and earn income from their share of a commercial property. Typically, REITs pay their investors with dividends, which represent the income generated from these properties.
Individuals do have the option of investing directly in REITs. For example, an investor can find a real estate mutual fund that provides them with the opportunity to enjoy capital appreciation, while another investor seeking near term income might want to pursue REITs.
Related Terms
target date fund, adjustable rate preferred stock, bond fund, commodity funds
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