Commercial Property Funds

Commercials Property Funds are a type of Mutual Fund and therefore a good investment if you have little time to keep an eye on markets or simply don’t have the experience.

It is a managed fund where somebody does the buying and selling in commercial real estate. The bigger the fund the better the spread and lower the risk.

You should keep an eye on what commercial property prices are doing though, or talk to your financial planner before investing and when deciding whether to leave a fund if you are not locked in.

One good thing with Commercial Investment funds though is that commercial property is mainly rented and it’s the generated rent you get your returns from. A downturn in the market is unlikely to ruin your fund and it may simply have to hold on to its property until prices increase, and start selling again. Rent yields will of course fall if units are empty or reduced but if you can afford to hold on to your shares in a commercial property fund they are unlikely to lose much value.

The fund buys and sells property often without you knowing it but sale prices are invested back into the fund so that its value grows and rent and sales fees come to you as a dividend which should outperform almost any interest rates, including those you might pay if you chose to borrow money to invest in such a fund.

Commercial property funds have over the years been seen as usually a second best investment but while other investments have come and gone and been the darling and then the dud, commercial property funds have remained solid as long as you don’t need to sell.

The price to sell your shares may fluctuate but will usually come back in time as when the economy picks up again though some stocks and shares will never rebound, commercial property’s value is always linked to the economy’s success.

Currently while some investment types still look slightly wobbly including many bonds and plenty of stocks and shares, mutual funds look better for their spread though some are still prone to shocks in major sectors such as oil.

Property is rising in popularity as an investment, as the lowest risk way to benefit from the expected growth in commercial property prices. This means that many people are snapping up shares in these funds.

A lack of new commercial property is expected in a couple of years as many major commercial developments including retail and industrial take many years to plan and build.

For a slightly higher risk fund with a chance of better returns look at those investing in commercial property in BRIC countries especially Brazil, a nation who seem to have a passion for shopping and a growing middle class in this fast emerging industrial nation.

Try to make sure your fund you buy into actually has property at the moment, if they are simply sitting on a large pile of cash they may struggle to find commercial property to buy within a year or so or will only invest in projects still being built. Legal and General’s fund is a fund with a medium sized low risk portfolio.

Henderson have a good level of occupancy in their properties and long tenancies meaning that you get a good yield on this fund.

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