Real Estate provides so many investment options that you might find a hard time when starting.
The state of analysis paralysis settles in, and it’s easy to over-analyze all your possible decisions.
- “Should I start looking for some rentals?”
- “Fix-and-flip sounds exciting!”
- “This guy on the podcast is making big bucks with mobile homes.”
If you find yourself in this scenario, spinning your wheels without finding a good way to get started, here’s my tip: start with a Real Estate Fund.
You’ll get instant exposure to real estate, diversification, and a professional management team.
They can give you a head start in building cash for a future rental property.
They can also give you that instant diversification and that passive income you were looking for.
Criteria to pick a fund
Mutual funds cannot beat the market consistently. So don’t spend your money in a more expensive mutual fund thinking that it will pay off.
Let’s borrow the wisdom of the Oracle of Omaha Warren Buffet. Make monthly investments in a low-cost fund.
Want to see if an investment fund is resilient enough? Check its track record!
A good sign is whether the fund was around before 2008 and was able to navigate and survive the storm.
My favorite Real Estate Funds
Vanguard REIT ETF
VNQ ticks all the boxes when it comes to reliable real estate funds to invest your money in.
With $34.4B net assets, it’s by far the biggest Real Estate fund there is. The second largest, iShares U.S. Real Estate ETF (IYR), has $4.8B.
Regarding expense ratio, it comes at 0.12%, following Vanguard’s long tradition of low-cost funds. It’s the second best of the market, losing the top position only for Schwab U.S. REIT ETF at 0.7%.
It also boasts a 3.66% high-dividend yield and a 10.54% total return since its inception in 2004.
Currently trading around $90, you won’t find an easier solution to get your real estate investing started.
Fidelity® MSCI Real Estate ETF
Whether you’re locked in a Fidelity 401k plan or are simply a fan of this successful investment firm, here’s another good choice.
FREL is designed to keep track of the MSCI USA IMI Real Estate Index. ETFs tied to index funds generally come with lower expense ratios, and this is no different. It matches Vanguard VNQ at 0.12% expense ratio.
The fund holds 183.4M in net assets, far from Vanguard’s, but still within the top 10 largest funds in the U.S.
Besides low-fees it also has year to date return is at 14% and a dividend yield of 2.80%. A very good option for investment as well.
Doesn’t matter if you’re dreaming of a prospective rental property or simply trying to get more diversification in your portfolio, these two funds are the easiest way to get started with Real Estate.
Compare these fund, figure out if they are right for your situation, and take action! The most important thing is to get started and let time and compound interest work their magic.