Saturday, November 12, 2011

Invest in Multifamily Houses in Jersey City?

I saw an ad in the Australian Financial Review today to invest in the US Masters Residential Property Fund. I already invest in US property through the TIAA Real Estate Fund, which does include apartment complexes but not small multi-family or single family houses like this fund does. The supposed advantages are a high yield relative to investing in single family homes in Australia, the low price of housing currently in the US, and the high value of the Australian Dollar. The fund is not hedged, so if the Australian Dollar falls the value in AUD terms will go up. Also it is cheap to borrow in the US, though currently the fund is not borrowing. The management fee is about 1.6% per year. There are a few possible downsides:

1. The fund is currently trading at $1.64 on the National Stock Exchange (formerly the Newcastle Stock Exchange), but it's NAV is $1.54.

2. The application fee amounts to 4%. Combined, this means that you lose more than 10% of your money right away.

3. Selling units would mean trading on the NSX. Neither CommSec nor Interactive Brokers trades on this exchange.

4. All the houses bought so far are in Jersey City, which isn't very diversified. At least it isn't Michigan I guess...

Point 3, rules out buying units in the market unless I was to set up an account with Macquarie say... So I think I'll pass on this. What US REITs invest in this investment class that I could buy through my Interactive Brokers account?

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