Property Investment Schemes: What Investors Should Know
Some people are wary of property investment schemes. They are not sure how the schemes work or how much money they need.
Investors in Australia and overseas continue to put money into property. Since 2022, however, higher interest rates, higher building costs and project delays have put pressure on some schemes, particularly property development schemes. The Australian Securities and Investments Commission, called the regulator on this page, has reviewed property lending and private credit funds closely during 2025 and 2026 and has stopped some offers to retail investors. Investors need to choose carefully.
Many people invest in property to earn regular income and capital growth over the longer term. This article explains the common types of property investment scheme, how they work and what to expect.
How to Choose the Right Property Managed Investment Scheme (“property schemes”)
Property schemes are one way to invest in property. Before you invest, make sure you have chosen the right scheme for you. Schemes and managers vary widely in type and quality.
If you buy property directly, in your own name or your entity’s name, the size of the purchase is limited by your financial capacity. A property scheme gives you exposure to a wider range of property types and sizes. Schemes can invest in residential, commercial, industrial and multi-use property, or a combination of these. Each type has its own characteristics and risks.
You can also gain exposure to property through funds that invest in real estate, property mortgages, shares in special purpose vehicles that own real estate, and hybrid structures.
There are a few general types of property schemes:
- Retail (registered) or wholesale (usually unregistered)
- Listed on a stock exchange (real estate investment trusts) or not listed on a stock exchange
- Passive: buy, lease and hold. These funds can hold one property or many.
- Property development schemes. These vary enormously in their structure and risk profile, including greenfield sites.
What do I get if I invest in a property investment?
In a property investment an investor normally acquires units in a unit trust. The units represent an investor’s proportional interest in the underlying assets of the trust. As the value of the trust’s net assets increases, so should the value of the units acquired. However, this is not always the case, particularly with listed real estate investment trusts. Their value can vary significantly with movements in the stock exchange.
Listed property schemes
These schemes are listed on the Australian Securities Exchange and are also known as real estate investment trusts. Units can be bought and sold on the exchange at the price agreed at the time. Even some listed trusts have limited liquidity, or none at times, meaning there may be no buyers. Listed trusts also vary significantly in size and property mix.
Unlisted or private property schemes
An unlisted property scheme is not listed on a public stock exchange. The properties are privately held and the details are not made public. A scheme offered to retail investors has a product disclosure statement issued by a responsible entity. A scheme limited to wholesale investors has an information memorandum issued by a suitably licensed trustee.
These schemes either run for a set period, for example seven years, or are open ended. With a set-period scheme there may be no way to redeem your units before the end, so these schemes are considered illiquid.
Other Issues to Consider
- Borrowing (also called gearing): The loan-to-asset ratio varies between property funds. Gearing is often limited to around 50% of the value of the real estate the fund holds. This lending is usually secured only against the asset, and investors are not expected to provide personal guarantees. Ask the manager for the borrowing limit and what happens if property values fall.
- Portfolio diversification: Check the number, value, sectors and locations of the properties in the portfolio.
- Valuation policy: Investment managers have commonly obtained independent valuations every two or three years, and in other years used valuations by directors, or kerbside valuations (an outside inspection only). The regulator has said that valuations in private credit and property funds must be current, accurate and based on realistic assumptions. Ask how often valuations are done and who does them.
Questions to Ask Before You Invest
- Does the manager hold a licence that covers this activity? You can check the regulator’s licence register.
- What is the manager’s track record with similar properties?
- What are all the fees, and does the scheme deal with companies connected to the manager?
- How often is the scheme valued, and by whom?
- How much borrowing is allowed?
- Are distributions paid from income, or from capital or borrowing?
- How and when can I get my money out, and at what cost?
Disclaimer: This page contains general information only. It does not take into account your objectives, financial situation or needs, and it is not financial product advice. Read the product disclosure statement for any scheme before you invest.