How Investors Can Choose The "right" Property Fund

By Author: Bradley Weiss
Total Articles: 159

Many investors choose a property fund to optimise asset growth in UK real estate, particularly in the residential sector. But not all funds are managed equally.


The draw to invest in real property in the UK is instinctive and time-honoured. For example, the term “landed gentry” speaks to the historic nature of wealth accumulation through ownership and transactions of real property. Land is a limited resource, with value variations that are determined by a host of factors (location being one of the most important) and which can change - to the benefit of those holding title.


But the categories of ways to invest in land or buildings are broad - ranging from commercial to industrial to residential, in and outside of London as well as far away from the Capital City. What surprises many people is the fact that across the entire country, residential property comprises the single largest asset class, valued at over £5 trillion.


Not everyone wants to own property that they must manage, avoiding the buy-to-let phenomenon that has proved popular among some in the face of a growing renter population. Others lack an interest in the business of actual homebuilding. Instead, individuals and institutions are turning to property fund management teams who manage their investment money in development programmes.


These teams are made up of real estate development professionals who acquire then improve land in some way before selling it again to home builders or, if they also build, to home buyers (more typically the home builders buy lots after site assembly tasks are completed, allowing them to focus on smart construction for the market). So for the investor, it’s a matter of choosing a development management team or a homebuilder to invest in.


So how does an investor choose the right property fund managers? He or she might use this as the checklist for deciding which team earns their trust:


Ideas and rationale for choosing a location - The property fund partners should be able to demonstrate rigorous research that helped them identify areas where the largest up-value potential exists. This means finding land that can be purchased for a price that allows a sizeable margin when resold.


Track record of success with planning authorities - That value increase is most significant - and essential - when planning authorities grant a use change to the land.


Skilled design - The value of land is also enhanced when the design of the development meets modern expectations. Increasingly, a sustainable focus on smart (sustainable) infrastructure, landscape and quality-of-life factors are incorporated into the scheme.


Skilled asset management - The firm in charge of the joint venture land opportunity will spend money on infrastructure development such as roads and utilities. How well they are able to optimally invest to achieve a maximum return plays a key role in the total asset growth realised by the investor.


Choosing any kind of partner in an investment is important, but the investor need not do it alone. Speak with an independent financial advisor for guidance on all strategies and decision-making relative to wealth accumulation.