Law Office of Henry B. LaTorraca Civil Trial Attorney

Real estate interval funds

California residents who wish to invest in real estate may have a relatively new option open to them. There is a type of mutual fund called an interval fund that promises excellent returns in exchange for agreeing to somewhat less liquidity.

Unlike traditional mutual funds, which allow unlimited redemptions, interval funds generally permit an investor to request one only once per quarter. This allows the fund to invest in more complex opportunities and avoid currency fluctuations. Instability in currency is one of the major reasons that funds may suddenly lose value, and the release of liquidity requirements holds the fund above the fray and avoids many of the problems that come with panics and runs on the market.

The more stable sources of funding represented by these interval funds allows access to investments in real estate that are usually closed to non-institutional investors. These may include credit on commercial real estate, equity for private real estate and debt for private real estate. There may also be smaller investment minimums associated with these funds.

Investment in real estate has the potential to be a complex venture, and an attorney's assistance may well be welcome to those who are doing it for the first time as well as those who have more experience. The attorney can check contracts for difficult provisions and help to research the fund and its portfolio in order to make sure they are suitable. They may also be useful in making sure that full compliance with the law is maintained and the client is properly protected.

Source: National Real Estate Investor, "What are the Advantages and Drawbacks of Real Estate Interval Funds?", John Snowden, Nov. 4, 2016

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