Call us on 1300 794 893

Your Money

What’s a property trust?

Property trusts are investment where money is, as the name suggests, invested in property. Investors buy ‘units’ in an investment property, which is run by a professional investment manager.

These kind of trusts may also be called a property fund or property syndicate.

According to the Australian Securities and Investments Commission’s (ASIC) Fido website, the money invested remains there until the properties are sold (when the trust ends). The net proceeds are then distributed among the investors.

Investment properties are chosen and bought by the investment manager. The investment manager looks after “maintenance, administration, rental collection and improvements to the properties”. Investment properties can be in any area from commercial, retail, industrial, to other property sector assets.

ASIC says in return for investing money (or capital) in the trust, it is possible to get a regular income, usually half year, which is called distributions. Keep in mind though that distributions are not guaranteed.

You may also get a ‘capital gain’ on your original investment. If the price of the assets in the property trust have increased when they are sold, you get a capital gain. If they have decreased, you get a capital loss.

Listed and unlisted

There are also listed and unlisted property trusts. These are not listed on the Australian Securities Exchange.

ASIC says in an unlisted property trust, it’s not possible to see whether the price of an investment is going up or down, so it’s difficult to decide to buy or sell; there is no supervision of this type of trust by a market supervisor; getting out of an unlisted property trust can be more difficult than a listed property trust; and if you are allowed to take money out of the trust it is often subject to strict conditions and there may be fees involved. Many of these types of trusts don’t allow you to withdraw money before the trust ends because the often assets can’t be sold easily.

ASIC says the investment manager must provide a Product Disclosure Statement (PDS) with information about the property trust, as well as update you with any significant changes to the trust. In the case of unlisted property trusts, the investment manager should provide ongoing disclosure documents.

As always, you should consider seeking advice from a financial adviser before delving into the world of a property trust.

For advice you can trust, book a complimentary first appointment with Switzer Financial Services today. 

Published on: Tuesday, February 16, 2010

blog comments powered by Disqus
Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300