How to create a real estate investment fund?

Understanding the real estate investment fund

A real estate investment fund is a vehicle that makes it possible to raise capital from investors in order to invest them collectively in real estate. Unlike individual real estate investment, it is based on a logic of risk sharing, of professional management And of portfolio diversification.

This type of fund is particularly popular for:

• its steady return potential,

• its stability compared to other assets,

• and its ability to make real estate investment accessible to a wide audience.

It differs from other types of funds (shares, bonds, crypto...) by its specialization in physical assets (buildings, offices, shops, homes, etc.), often accompanied by rental returns and long-term capital gains.

For a broader introduction to the topic, also discover our article on create an investment fund.

The different types of real estate investment funds

Creating a real estate investment fund involves choosing a structure adapted to the objectives set. There are several possible legal forms, each with its regulatory, fiscal and operational specificities.

Real Estate Investment Company (SCPI)

SCPIs are unlisted structures allowing individuals and institutions to invest in rental real estate, without having to directly manage the properties.

Key features:

• investors are buying SCPI shares, entitling you to a fraction of the rent received,

• Revenues are redistributed regularly, after deduction of management fees,

• the SCPI can be specialized (offices, shops, health...) or diversified.

Advantages:

• accessibility from modest amounts,

• pooling of rental risks,

• management fully delegated to a specialized company.

Disadvantages:

• limited liquidity (sometimes long resale of shares),

• significant entry costs (8 to 10% on average).

Real Estate Collective Investment Organization (OPCI)

OPCIs were created to meet the need for liquidity And of flexibility. They invest in both:

• real estate assets (at least 60%)

• financial instruments (shares, bonds, etc.),

• and cash flow.

They can be open to everyone (general public) or reserved for qualified investors (OPCI pro).

Advantages:

• better liquidity thanks to the financial part of the portfolio,

• diversification of sources of performance,

• more regular valuation of shares.

They are particularly suitable for investors who want exposure to real estate without the constraint of blocking.

Alternative Investment Fund (AIF)

AIFs include a wide variety of structures, often used for more complex or tailor-made projects (private real estate, club deals, co-investment vehicles, etc.).

Used in particular for:

• leveraged investments,

• real estate development projects,

• portfolios on niches (logistics, managed residential...).

They generally require a tailor-made structure, an expert team and specific authorizations (AMF approval, AIFM, etc.).

Key steps for creating a real estate investment fund

Creating a real estate fund requires careful preparation and compliance with a number of key steps.

Investment strategy development

It all starts with the clear definition of investment strategy :

• What types of assets to target? (housing, offices, shops, health, hotels...),

• What geographic area? (France, Europe, world),

• what approach? (rental yield, added value, revaluation, transformation...).

It is also necessary to determine:

• the life of the fund (closed, open, with variable capital...),

• possible ESG criteria,

• the target level of return and risk tolerance.

A clear and differentiating strategy is an essential lever for attracting investors.

Choice of legal structure and approvals

Depending on the nature of the assets, the target of investors and the size of the fund, several legal structures can be considered:

• SCPI or OPCI for funds available to the public,

• FIA or Civil society with variable capital for private club deals,

• Management company or delegation to an authorized company to ensure regulatory compliance.

Obtaining a AMF approval or registering as specialized professional fund (FPS) or alternative investment fund (AIF) may be required depending on the case.

Specialized legal support is strongly recommended at this stage.

Establishment of the management team

The success of a fund depends on the quality of its sound management team, which must bring together a variety of expertise:

• real estate (acquisition, management, arbitration),

• finance (structuring, fundraising, reporting),

• regulatory compliance (KYC, AML, AMF reporting...),

• investor relationship.

It is possible to internalize these skills or to call on specialized partners (management company, consulting firm, service providers).

The team must also have the tools necessary for the daily management of the fund (asset tracking software, investor access platform, etc.).

Fundraising and communication

Once the structure is ready, the raising capital is the central stage:

• targeting investors (individuals, professionals, institutions),

• fixing the entry ticket and the terms of subscription,

• development of commercial documentation (presentation, statutes, information note, etc.).

At the same time, it is essential to build a clear and coherent communication strategy :

• fund branding (name, positioning, visual universe),

• digital presence (site, social networks, subscription platform),

• animation of the investment community.

One integrated platform as overlord.fund can facilitate this step by centralizing legal management, underwriting, and reporting.

Real estate regulations and compliance

Real estate funds are subject to strict regulations in order to protect investors and ensure transparent management.

The main obligations concern:

• The legal structure (approvals, registrations, regulatory filings),

• the compliance with marketing rules (CIF status, canvassing, fair information),

• The anti-money laundering procedures and the financing of terrorism (KYC/AML),

• the regular reporting to the authorities and subscribers (value of assets, performance, evolution of assets),

• The governance (supervisory board, auditor, ethics...).

Some structures such as SCPIs or OPCIs are necessarily managed by approved management companies, which ensure end-to-end compliance.

However, more flexible vehicles (SCI, FIA) require the same regulatory rigor if the investors are not all professionals.

Risks and challenges specific to real estate funds

Creating a real estate investment fund presents attractive opportunities, but also involves a series of risks And of specific challenges that it is necessary to anticipate rigorously to guarantee the sustainability of the project and to protect investors.

Rental vacancy

One of the main risks in rental real estate is vacancy, that is, the absence of tenants for a given period of time. This has a direct impact on the fund's income.

The causes may be:

• a poor location of the property,

• a lack of attractiveness or maintenance,

• an unfavorable economic situation.

To deal with them, the fund must:

• target areas with high rental demand,

• diversify its portfolio (residential, tertiary, health...),

• include a safety margin in your cash flow forecasts.

Fluctuations in real estate prices

Like any asset, real estate can be subject to a Decrease in value, linked to conjunctural or structural factors:

• rising interest rates,

• economic downturn,

• demographic or fiscal changes.

Good management of Market value of the wallet goes through:

• well-negotiated acquisitions,

• active management (works, revalorization),

• regular trade-offs to capture capital gains.

Management and maintenance constraints

Real estate requires a constant operational management :

• rent monitoring,

• building maintenance,

• relationships with tenants,

• compliance with standards (accessibility, security, DPE...).

Poor management can lead to unexpected costs, a deterioration in profitability or disputes. It is therefore crucial to have:

• a responsive management team,

• reliable service providers,

• a well-sized budget for works and contingencies.

Legal and fiscal risks

Each asset and each transaction is subject to complex legal rules :

• urban planning, condominium, commercial leases,

• local taxation (property tax, registration fees),

• income taxation (corporate tax, IFI for investors...).

The structuring of the fund must therefore:

• be optimized fiscally,

• anticipate the wealth arrangements of its investors,

• incorporate solid legal clauses into each contract.

Working with notaries, specialized lawyers and accountants is indispensable.

Liquidity risks

Unlike financial assets, Real estate is not liquid. Reselling can take a long time, especially during a downturn. This can be a problem if:

• an investor wants to get out of the fund quickly,

• the fund needs urgent liquidity.

Some structures, such as OPCIs or SCIs with variable capital, allow a better liquidity thanks to the presence of financial assets or progressive repayment mechanisms.

It is essential to clearly inform investors about exit conditions, deadlines and modalities.

Case studies: examples of successful real estate funds

Drawing inspiration from existing funds allows for a better understanding of key success factors in the field of collective real estate investment.

Stone-value management (performance SCPI)

This SCPI specializing in office buildings in Île-de-France knew how to:

• target quality assets in dynamic areas,

• optimize rental management,

• generate stable annual returns of around 5% net.

Its strategy is based on:

• a detailed analysis of the tertiary market,

• a diversification of tenants (large companies, SMEs),

• prudent debt management.

OPIMMO (OPCI general public)

OPIMMO, managed by Amundi Immobilier, offers a good example of successful diversification:

• real estate exposure (offices, shops, residential),

• 30 to 35% of financial assets,

• balanced return and good liquidity.

It attracts wealthy clients looking for stability and transparency.

Regional residential club deal

Private vehicles, assembled in the form of SCI or FIA, aim at operations targeted at:

• homes to be renovated,

• secondary areas with high rental potential,

• a horizon of 5 to 7 years with optimized resale.

Flexibility, proximity and alignment of interests between partners are their strength.

Lessons to remember

High-performing funds have in common:

• one coherent and readable strategy,

• one experienced team,

• one transparent communication.

They also know how to adapt their model according to market developments (rates, taxation, environmental standards, etc.).

Frequently asked questions (FAQ)

What is a real estate investment fund?

A real estate investment fund is a collective structure allowing several investors to invest their money in a real estate portfolio. The fund is managed by a professional team that selects, acquires, manages and resells assets in the common interest.

The income received (rent, capital gains) is redistributed to investors according to their share in the fund.

How does a real estate investment fund work?

The operation is based on several steps:

1. Fundraising to investors via a subscription,

2. Acquisition real estate assets corresponding to the defined strategy,

3. Rental and technical management property (maintenance, rent, taxation...),

4. Distribution income to investors (often quarterly),

5. Arbitrations possible (resale of assets to optimize performance).

Some funds provide for a limited lifespan, with a final liquidation. Others are open on an ongoing basis, with share repurchase mechanisms.

Conclusion

Creating a real estate investment fund makes it possible to structure the acquisition, management and valuation of properties in a professional and collective framework. Of the investment strategy To the Fundraising, going through the regulatory compliance, each step must be carefully thought out.

Thanks to adapted structures (SCPI, OPCI, FIA...), it is possible to build a profitable, secure and attractive vehicle for investors. The expertise of the management team, the transparency of reporting and the quality of the assets selected make the difference.

Do you want to create your own real estate fund? Discover our Overlord platform, the back office for real estate investment funds. Make an appointment now to discuss your project with an expert and benefit from a demo.

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