Understanding Alternative Investment Funds

Real estate land funds are a type of alternative investment that can provide solid and significant returns.

Trading in stocks and bonds is by far the most recognised means of investing. But in fact there are alternative investment funds that serve a key investment role for individuals of high net worth and for corporations and institutional investors.

Alternative investment funds cover a wide range of categories, from managed futures to hedge funds, private equity funds, exchange funds and real estate. Each of these offers opportunities – and risks – for the investor that are not found in traditional investments, stocks and bonds.

Real estate land funds are a type of alternative investment that can take many forms. These include everything from commercial property (industrial warehouses, retail centres, office buildings) to multifamily housing to undeveloped land. Each type of real estate-based investment fund carries its own set of tax implications and growth potential for the investor that can be advantageous. For this reason, these investments need to be evaluated one investor at a time.

To illustrate, a land investment fund can be focused on areas zoned for one purpose or another. The market factors that would favour one such an investment – for instance, land appropriate for new housing construction, at a time when demand for housing is expected to increase – can provide a good return in a few short years. But if that land is unlikely to get a change-of-use zoning from the local authority, the value proposition changes. These and other variables require investors (and investment advisors) to study such alternative investment funds carefully.

When it comes to investing in land, it is wise to focus on the most profitable part of the land development process: acquiring strategic land sites that have been identified to come forward for residential or mixed-use development but do not yet have detailed plans or permissions.  There exist strategic land investment advisors who produce sustainable "development-ready" land sites before selling on to house builders or other development companies.