Real Estate Investment Trusts – legal status in Poland and global trends

Real estate investment is one of the most lucrative forms of capital multiplication. The real estate market is constantly growing and it is the least risky sphere of capital investment, however, it requires significant investment funds. To increase access for the less wealthy, special real estate funds are created to allocate assets to investors who want to start their adventure on the real estate market.

Types of real estate funds

The division into different categories of funds is made on the basis of the risk and rate of return of a given investment. They range from conservative to aggressive and are defined by both the physical attributes of the property and the amount of debt used to capitalize a project. We distinguish the following types:

  • Core Real Estate Funds

The term “core” refers to real estates located in high-quality locations with high-quality tenants. Core property investors are looking to generate stable income with very low risk. These properties require very little hand-holding by their owners and are typically acquired and held as an alternative to bonds, generating stable and consistent cash flow to their owners and their values tend to be the least volatile.

  • Core Plus Real Estate Funds

In terms of property class and profit prospects, these funds are similar to core funds, but with the low or moderate risk profile. Core plus property owners typically have the ability to increase cash flows through minor property improvements, management efficiencies or by increasing the quality of the tenants. The difference from previous funds is the fact that profit is not so easy to predict and core plus investment requires more active participation in property.

  • Value – Add Real Estate Funds