Irish Life are launching a geared commercial property fund - 60% geared. I was wondering if anybody has any experience if investing in these type of products?
Don't know about this particular fund, but the first thing is, the gearing will magnify profits but will equally magnify any losses if the property market goes against you.
I've invested in a couple, and things I'd look out for include:
Look at the projected returns and see what the return would be if there is zero capital appreciation in the property values. If the rental yields are decent, there should be a modest return even with this.
Make sure that there are properties already purchased or at an advanced stage of acquisition. It is not unheard of for some of these funds to take your money and then sit on it in cash for six months to a year while they decide what to buy.
Be aware that there is usually a five year plus time frame for these investments with no early exit and because property is not as liquid as equities, you may not be guaranteed a specific exit date.
Management costs and expenses vary wildly - make sure you understand them! That said, a higher cost fund may be worth it, if the investment is good.