Choosing a real estate fund is not only a financial decision but can also be a profoundly emotional decision, just as any other significant investment. Plus, it can be daunting for a first-time investor as you weigh your goals, desired outcomes, and investment amount.
Real estate proves attractive for many, whether it be financial freedom, generational wealth, a hedge against inflation, or adding diversity to an existing portfolio. There are plenty of real estate funds to choose from. However, selecting the right one can be the difference between financial security versus losses and unnecessary stress. In addition, there are the questions of risk, who’s managing the portfolio, the investment strategy, and more to consider!
Keep reading to look at critical strategies to help you determine the right fund for your circumstance, the winning combination for a fund investment option, and how we’ve aligned the Viking Fund with our values of purpose and investor-focus decision-making.
What Is a Real Estate Fund?
A real estate fund is a mutual fund that invests in real estate. This means that several investors pool their money into a ‘pot’ (or fund) that property investment specialists professionally manage.
The capital from the pool is used to purchase properties that show traits of being a successful investment opportunity. Investors receive monthly dividends from the rental income plus payments from any property sale within the fund. How much you receive will depend on the structure of the fund.
When evaluating investment opportunities, it’s important to remember that a real estate fund is not a Real Estate Investment Trust or crowdfunded project.
How Do I Find the Right Fund?
As with any investment, finding the best fit for your investment dollars and building long-term generational wealth starts with the type of fund you’re considering and your decision-making and thinking processes.
While many funds will pay well, very few opportunities will deliver the returns you need while also focusing on investor experiences that minimize risk and does some good in the world. Of course, many investors want to get into real estate investment purely to make money, but choosing a fund that also focuses on capital preservation can help add a layer of security to your decision.
Four Key Steps to Choosing the Right Real Estate Fund
So, what does the right real estate fund look like for multifamily real estate investing? Here are four steps to work through when considering a fund for real estate investing.
1. Research the Company and Philosophy
Of course, researching the fund is one of the fundamental pillars of the pre-investment checklist. Some key points to help get you started include learning about:
- The fund manager’s story and experience
- The investment strategy
- The payout-structure
- The financial position of the fund (debt to equity)
- Opportunities to offset tax
- The minimum investment amount (for example, you may need to be an accredited investor to invest)
- Forecasting, returns, and the justification for these numbers
- Overall legality of the fund (while past performance is not indicative of future results, any previous issues regarding corporate law breaches are serious)
As a final point, examine the underlying philosophy of the real estate fund. Is it a high-risk fund or more investor focused? What are the motivations underpinning the fund? Then, match these critical points to your appetite for risk and exposure limits.
2. Talk With Key Players
After researching how to invest in multifamily real estate, there’s absolutely nothing wrong with reaching out personally to fund managers to discuss their track record of success. Excellent fund managers will be open to dialogue and actively engage with potential investors looking for real estate investments. Some questions to help you get started include:
- How does your portfolio manage risk?
- How do you determine a good investment opportunity?
- What is an investment mistake you made in the past, and how did you rectify it?
- What makes a successful fund?
- How do you manage market conditions such as inflation?
You can also reformulate the critical points above under heading one into questions for a starting point. As a final point, don’t be afraid to ask tough questions!
3. Research How They Analyze Opportunities
Be sure to research how the fund analyzes the multifamily properties that go into the real estate fund. For example, some funds may invest in older properties in up-and-coming areas to earn more upside income. Others may invest in established communities in affluent areas with higher rental rates.
Some funds may invest in several different risks leveled opportunities forming a more spread portfolio. For example, Viking Capital focuses on class A and B asset classes which are conservative, low-risk opportunities with upside potential. This allows us to maximize growth while maintaining a focus on capital preservation.
Understanding the underlying assets and their selection will give you a better idea of how protected your money is within the fund.
4. Define Your Personal Goals
Finally, when looking for a real estate fund to invest in, don’t forget to match it against your own investment goals. For example, what is the lifestyle you’d like to live after your investment? How do you want your investment dollars to work for your family and community? Finally, be aware of any common biases you may be subject to and how they might impact your investor outlook.
Viking Capital: Purpose Driven and Investor Focused
We created the Viking Wealth fund because we were busy physicians looking for a way to generate more income. We were working long days and couldn’t put in any more hours!
We’re sure you can relate if you’re a busy physician or medical professional.
A high-level job is excellent, but working more to make more is not always feasible after a certain point (especially in high-pressure professions), and you can feel burnout. At the same time, we wanted to build a lifestyle we’d dreamt of for our families and had big plans we needed to implement. Our underlying philosophy is:
- Spend less time making more money
- Have financial freedom
- Create social impact
- Create and protect generational wealth
- Generate passive income to support families and their futures
Our driving motivation is to do good through real estate. This means choosing assets that do good for the environment, helping our investors experience financial freedom, and supporting the local community.
Make the Smart Choice When It Comes to Real Estate Funds
When it comes to real estate funds, investment research is the name of the game. If you’d like to get started in real estate fund investing or are interested in learning more about how you can create generational wealth and earn passive income through Viking Capital, reach out to us today!