For Subscribers

Property Value Want to be a land baron but don't have the cash? Check out a real estate investment fund.

By Dian Vujovich

Opinions expressed by Entrepreneur contributors are their own.

If you fancy the idea of owning property but don't have thecash to buy it, a real estate fund may be what you've beenlooking for. Real estate funds have been growing in popularity overthe past few years. One of the reasons these income-producing fundshave enjoyed a shareholder increase is that most invest in equityReal Estate Investment Trusts (REITs).

An equity REIT is a stock that must pay out 95 percent of itstaxable income as dividends if it's to enjoy a tax-advantagedstatus. What REIT companies typically do is own and manage aportfolio of income-producing real estate. One REIT might ownapartment complexes in the Southwest; another could specialize inowning hotels nationwide.

Because there is almost no end to the real estate propertycombinations you can make, most equity REITs represent asector-specific diversified investment. Put a group of differentREITs in a mutual fund portfolio, and you multiply thatexposure.

"Real estate represents about 17 percent of ourcountry's investment asset base," says Robert W. Benson,who has managed the Pioneer Real Estate Shares fund since itsinception in October 1993. "The reason to have real estate inyour portfolio is diversification--and to invest in a part of theU.S. economy that's doing quite well at this point."

Another reason behind the growing interest in real estate fundsis that the fundamentals of the real estate cycle, which typicallylasts between five and seven years, have been and continue to lookstrong. Riding the wave of the real estate cycle can be tricky,however. There are easily 10 different real estate property types.If you've lived in one part of the country for any length oftime, you have firsthand knowledge of how prices on different typesof real estate can fluctuate: Sometimes prices on, say, multifamilyapartments are hot; sometimes they're not.

Benson figures the United States is about midway through a realestate cycle. "We're in about year three," he says."And we have at least a few years of improving fundamentalsahead of us, which could result in REITs growing their cashflows."

In the Pioneer fund, you'll find most assets invested infour different property types: industrial/office, hotels,apartments, and retail, with overweightings in hotels and officeand underweightings in the others. Of the portfolio's 33companies, 29 are REITs.

When looking for new investments, Benson focuses on equity REITsthat aren't necessarily the highest yielding but have thehighest growth potential and, hence, could increase theirdividends.

Even if the idea of real estate fund investing appeals to you,don't bet the farm. An asset allocation of between 5 percentand 15 percent is probably enough exposure. And as far asperformance goes, real estate funds have a mind of their own: In1997, the average annual total return for the group was 19.74percent. That's below the returns of both the Dow JonesIndustrial Average (up almost 25 percent) and the S&P 500 Index(up 33.4 percent). In 1996, however, the group's average returnof more than 36 percent beat the indices.


Dian Vujovich is a nationally syndicated mutual fundcolumnist and author of Straight Talk About Mutual Funds(McGraw-Hill), Straight Talk About Investing for YourRetirement (McGraw-Hill), and 10-Minute Guide to Stocks(Macmillan).

At A Glance

Fund name: Pioneer Real Estate Shares
Portfolio manager: Robert W. Benson
Managed by: Pioneer Funds Distributor Inc.
Total assets: $220 million
Average annual return: 14.54%
Maximum load: 5.75% on investments of $50,000 or lessManagement fee: 1%
Phone: (800) 225-6292

Web site:http://www.pioneerfunds.com
Figures are as of February 16, 1998

Contact Sources

Lipper Analytical Services Inc., (212) 393-1300, http://www.lipperweb.com

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Franchise

Love Cars and Want to Own a Business? Start With These 10 Automative Brands.

Whether you're interested in tool distribution, car washes or quick-lube service, these 10 automotive franchises are the top performers of 2025, based on the Franchise 500 Rankings.

Growing a Business

This Founder Is Scaling a Spicy Food Brand—and It's Putting the Heat On Her Marriage

Get practical advice from Dr. Drew and investor Kim Perell on this episode of Entrepreneur Therapy, featuring In The Kitchen with Alexandra founder Alexandra Baker.

Business Solutions

Busy Entrepreneurs Can Now Create Books With This AI Tool

This AI-powered tool helps entrepreneurs finally write the book they've been dreaming of.

Business Ideas

70 Small Business Ideas to Start in 2025

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2025.

Starting a Business

'Consumers Deserve Better': How Superstar QB Patrick Mahomes Is Brewing a Better Future for Coffee Drinkers

Backed by lead investor and 3-time Super Bowl champion Patrick Mahomes, Throne SPORT COFFEE is disrupting the $5B ready-to-drink coffee market.

Business News

Nvidia CEO Says '100% of Everybody's Jobs Will Be Changed' Due to AI

Nvidia CEO Jensen Huang says AI will transform how people get work done.