With more and more investors understanding the importance of diversification when it comes to building a balanced property portfolio and mitigating investment risk, a growing number of buyers in Australia are realising the financial and strategic benefits of pooling their capital together and investing in a property fund (often referred to as a property syndicate). For seasoned investors, especially, funds can open up a range of opportunities that often wouldn’t be accessible to the standalone buyer. So what further benefits can funded investments bring to your investment strategy?
Access to high-quality investment opportunities
Large-scale developments and commercial properties can both represent strong opportunities for investors. However, both these types of investments are highly capital intensive, and in reality not financially feasible for the majority of individual investors. In most cases, a high quality commercial property will cost upwards of $3 million or if not more to purchase, and a boutique apartment development could cost anywhere from $2 million to $15 million to complete. For the majority of investors, these types of projects would be too difficult to finance alone. Property funds, however, can give investors the opportunity to gain exposure to these assets, and at a fraction of the cost of investing directly. In many cases, these syndicated assets are often higher quality, and potentially more lucrative, than individual projects.
Opportunity for diversification
Another benefit of syndicated investments is that they also provide investors with a key opportunity to diversify their property portfolio. Since the capital outlay is lower when investing in a property fund (typically $50,000 or above), investors are able to spread their capital across multiple investments in different locations, be this through a mixture of residential and commercial funds or a combination of both syndicated and direct investments. In some cases, property funds themselves can be diversified and even comprise multiple types of properties in various locations.
By distributing capital across different areas and asset types, investors are able to take advantage of the growth cycles of different property markets, and even the individual movements of different industries within those markets. This diversification can also help investors build a more balanced portfolio that includes a mixture of both incoming-producing and high growth properties, in turn enabling them to benefit from ongoing cash flow as well as long-term capital growth.
Whilst distributing funds across different investments can help investors build a more balanced property portfolio, this diversification also plays a crucial role in limiting buyers’ exposure to risk and market fluctuations. Just as investing in different locations and asset types enables investors to take advantage of upturns in different markets, this strategy at the same time reduces the likelihood of being left with a stagnant property portfolio should one of these markets or industries experience a downturn. This can give investors a far greater level of protection than dedicating all funds into one asset and relying on that asset to perform.
Investing in real estate requires sophisticated knowledge of the market and constant monitoring of market trends, especially when you’re dealing with large-scale projects like commercial acquisitions or developments. The benefit of investing via a property fund is that these projects are typically managed by an experienced team who oversee the strategy and day-to-day management of the assets on behalf of investors. Providing you engage a reputable company with a strong track record, these managers can be invaluable in guiding the strategy of the funds and ensuring the assets stack up to feasibility checks, in turn minimising investment risk and maximising the potential value of the project.
Find out about our latest funded opportunities
Investing in a property fund can offer unique opportunities to investors, but this strategy isn’t suited to everyone. Before investing, it’s recommended that you speak to a financial advisor to determine whether this type of investment aligns with your investment goals and risk profile.
Pendragon Capital Pty Ltd AFSL: 237549 and Mair Property Securities Ltd ACN 091 623 862 AFSL number 238386. The information provided in this website is general in nature and does not constitute investment advice or personal financial product advice. This information does not take into account your investment objectives, particular needs or financial situation. You should seek independent financial advice.