Investments

Direct property investments
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What is

Direct property investment

Direct property is the term commonly used to describe real estate investments, whether it be the purchase of a commercial, industrial, retail, bulky goods, residential or any other property asset, which can either be held directly (direct ownership on the title) or indirectly through collective ownership vehicles such as managed property investments: funds, trusts and syndicates (Property Funds). Investors in Direct Property Investment Funds, including those offered by large institutions, public and private companies, are wholesale and retail (Mum and Dad) investors.

Over the last two decades, Direct Property Investment has grown dramatically and has become a core investment class for the growth of wealth through strong risk adjusted returns, while also providing a stable source of income through regular distributions of underlying rental income.

Features of a

Direct Property Investment Fund

There are many benefits to owning shares which make it an investment well worth adding to your investment portfolio. Listed are five advantages of investing in shares:

Tangible assets

Properties can be clearly identified with the Property Fund Manager disclosing how they plan to manage the asset(s) and any intention to acquire further assets.

Fixed Term

The investment will generally have a fixed life, usually between 5 to 10 years.

Liquidity

As property is a relatively illiquid investment, unlike listed shares which can be readily converted to cash, Direct Property Investment Funds are generally an illiquid investment. In other words, your investment in a fund cannot be withdrawn until the termination of the fund. However a number of Property Fund Managers have developed innovative features to provide liquidity options to those investors needing to exit their investment early.

Asset sale

If or when a property is sold from the portfolio, you will be entitled to receive your share of the net proceeds of the sale (in proportion to your initial investment contribution), including any capital appreciation.

Asset valuation

Typically property investments are subject to regular appraisal based valuations. Like all investments, property assets can appreciate and depreciate in certain markets.

Comparison

Listed VS Unlisted

Property Funds can either be listed or unlisted. Those which are listed on a securities exchange ie (ASX) are commonly called Australian Real Estate Investment Trusts (A-REITs). The units in the Property Trust are regularly traded, providing liquidity. Unlisted Property Funds generally do not have a market place for the trading of units.

An unlisted Property Fund usually consists of a unitised structure, with a fixed investment term and transparent investment purpose. The structure can either be open–ended meaning that the Fund Manager can continuously raise new money at any time (through the issue of new units) for the purchase of additional assets for the investment portfolio, or closed-ended (no more units can be issued) with a fixed and defined investment period in which money can be raised (typically 6 to 12 months). Returns from unlisted Property Funds are typically less volatile for investors compared to A-REITs and are known for providing a consistent inflation-linked income stream.

Investors in A-REITs, where units are listed on a stock exchange for trading, are able to determine the current market value of their investment and trade those units in the open market place. As a result, this investment, although liquid, can be far more volatile than unlisted vehicles meaning its value can fluctuate both up and down more readily.

Invest in property with Hejaz

Hejaz has access to hundreds of listed property managed funds. Let your property investments be our headache.