Why Invest in Real Estate Funds?
Passive income is just one potential benefit of investing in real estate funds. Here’s why they’re worth considering.
Why Invest in Real Estate Funds?
Passive income is just one potential benefit of investing in real estate funds. Here’s why they’re worth considering.
It’s no secret that real estate is a popular asset class. According to a poll by Gallup, 37% of American investors picked real estate as the best long-term investment.1 2025 marks the 12th year in a row real estate earned the top spot—and not by a slim margin. Real estate bested gold, the second favorite at 23%, by an impressive 14 percentage points.1
There are many different ways investors can gain exposure to real estate. Publicly traded real estate investment trusts (REITs) can be purchased in a brokerage account, making them broadly available to all investors. However, these investments trade like stocks, introducing the potential for daily volatility.
Owning and self-managing a rental property outright as a landlord is another way to invest in real estate. But between the late-night maintenance calls, the hassles of leasing and marketing, and the elbow grease required for do-it-yourself renovation projects, being a landlord isn’t truly a passive income generator.
Luckily, if you’re an accredited investor, you have options available to you that are both truly passive and potentially less volatile than publicly traded REITs. In this article, we take a closer look at private real estate funds and discuss how accredited investors can potentially benefit from them.
A primer on private real estate
Unlike their publicly traded counterparts, private real estate investments aren’t traded on an exchange. Because of this, private offerings like private real estate deals and real estate funds aren’t quoted continuously, which means they avoid short-term, sentiment-driven pricing and potentially feature lower volatility as a result.2
Investing in private real estate is also very different from being a landlord because the former is entirely passive. When you invest in a private syndication or fund, your syndicator or fund manager handles the day-to-day investment and operational work. Some vertically-integrated fund managers, like DLP Capital, will also handle property management, maintenance, renovations, construction, and leasing in-house on some or all of the properties within their portfolio.
If you invest in a real estate fund, your fund’s investment team will also make strategic decisions about acquisitions, lending, partnerships with sponsors, and asset sales, which means that you won’t have to do anything else after making your initial investment. You’ll enjoy a similarly passive experience if you invest in a syndicate, except your syndicator will focus on the single deal at hand, rather than on a portfolio of deals.
The one caveat to investing in private real estate, whether through a syndication or a real estate fund, is that you must meet the U.S. Securities and Exchange Commission's (SEC’s) definition of an accredited investor under Rule 501 of Regulation D.1 You can qualify by meeting one of two financial criteria:
The net worth test: You have an individual or household net worth of $1 million or more, excluding the value of your primary residence.3
The income test: You’ve earned an individual annual income of $200,000 or more (or a household income of $300,000 or more) consecutively across the past two years and reasonably expect to do the same this year.3
What sets real estate funds apart?
Earlier, we mentioned that accredited investors who allocate to private real estate can choose between real estate syndications and funds. From the outset, these offerings appear similar: both provide a potentially less volatile and fully passive investing experience. However, there are some important distinctions.
Arguably, the most important difference between real estate syndications and real estate funds is how they’re structured. Investing in a syndication gives you exposure to a single deal—for example, an equity investment in (or loan backed by) a single 40-unit apartment building in Florida.
On the other hand, a real estate fund may make equity or debt investments in dozens of multifamily properties across markets in a handful of states. In other words, you can think of a real estate fund as multiple real estate deals rolled up into one.
This unique advantage makes real estate funds comparatively more diversified than syndications, since the former allows you to gain exposure to a basket of deals at once.
One thing to note is that real estate funds typically feature higher minimums than syndications. While you can typically meet a syndication’s minimum by investing $25,000 or more (or sometimes as little as $5,000 or more), real estate funds usually feature minimums ranging from $50,000 to upwards of $250,000.4
However, as a high-net-worth investor, that may be an advantage. By investing a single six-figure lump sum in a real estate fund, you can gain diversified exposure to private real estate while simultaneously diversifying your portfolio away from stock market volatility.
Investors in DLP Capital-sponsored real estate funds can make an impact on America’s affordable housing crisis and unlock the potential to earn targeted returns of up to 13%.
Is it good to invest in real estate funds?
Real estate funds can be a good option for accredited investors who want to gain diversified exposure to a large number of real estate assets at once. Real estate funds can also be a good fit for accredited investors who desire passive income or those who desire a less-volatile alternative to publicly traded real estate investment trusts (REITs).
What are the benefits of real estate funds?
Real estate funds can unlock benefits such as the potential to earn passive income and portfolio diversification. Real estate funds can also help you gain exposure to real estate without the volatility that comes with exchange-traded real estate investment trusts (REITs) or the ongoing work that comes with being a landlord.
Why would a real estate loan be considered a secure loan?
A real estate loan is considered a secure loan because it’s secured, or backed by, the borrower’s stake in the property. In other words, the borrower pledges the real estate asset as collateral, which can be seized by the lender if the borrower defaults on their loan.
Is $5,000 enough to invest in real estate?
$5,000 is enough to invest in real estate if you purchase publicly-traded real estate investment trusts (REIT) shares. However, if you want to allocate to a private real estate fund, you’ll likely need more capital.
Are real estate funds risky?
Because real estate funds invest in many deals simultaneously, they’re generally considered to be less risky than a single-deal syndication or a self-managed rental property, in which all your money is invested in a single asset.
1Stocks Fall, Gold Rises; Real Estate Still Best Investment. Gallup. May 2025.
23 reasons private assets are less volatile. Investment Executive. May 2025.
3Regulation D—Code of Federal Regulations. National Archives. June 2025.
4How to Invest in Private Equity Real Estate. Investopedia. December 2024.
STATEMENTS ARE THOSE OF DLP CAPITAL ONLY AND ARE NOT GUARANTEED, NOR SHOULD SUCH STATEMENTS BE RELIED UPON. FORWARD-LOOKING STATEMENTS ARE EXPRESSIONS AND BELIEFS OF DLP CAPITAL AND SHOULD NOT BE RELIED UPON. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE PERFORMANCE. NOTHING IN THIS IS A SOLICITATION OR OFFER OF SOLICITATION. ALL INVESTMENTS IN ANY DLP CAPITAL SPONSORED FUND ARE TO BE MADE AFTER A REVIEW OF THE PPM, OA, AND SUBSCRIPTION AGREEMENT. DLP CAPITAL IS NOT PROVIDING TAX ADVICE. CONSULT YOUR TAX AND LEGAL PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISIONS.
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