I
nvestors should start with a clear grasp of the real‑estate fund landscape. The main categories are:

    * **Publicly traded REITs and index funds** – highly liquid, but usually offer modest income and move in lockstep with the broader equity market.

    * **Non‑traded and interval funds** – less liquid, yet they often deliver higher yields and offer tax‑deferral advantages.

    * **Private funds** – tailored strategies aimed at accredited investors, typically featuring more concentrated exposure and higher potential returns.

    Rich Arzaga, founder of Monument’s “Real Estate Whisperer,” stresses that a client’s income goals, tax situation, and liquidity preferences dictate the best fit. “The right choice hinges on those factors,” he says.

    Merriah Harkins of Lukrom emphasizes diversification as the cornerstone of any real‑estate allocation. She recommends blending private credit, REITs, development funds, and other vehicles that span multifamily, single‑family, retail, and commercial properties across public and private markets. “Clients who hear 15 % versus 8 % must understand the risk profile behind each figure,” she notes. “Knowing a fund’s structure and its risk‑mitigation tactics is essential.”

    Risk and reward vary widely among funds. “Conservative options can offset the volatility of riskier holdings,” Harkins explains, ensuring a portfolio remains resilient when other assets falter.

    What makes a fund attractive? Arzaga points to a proven track record, seasoned management, and disciplined leverage. He labels a fund “bad” if it carries avoidable risk—such as a nascent vehicle with limited history, inexperienced leadership, or excessive borrowing. Harkins adds that single‑asset projects are inherently riskier than diversified funds that cover multiple property types. She advises investors to scrutinize the sponsor’s performance across economic cycles, fee structures, tax benefits, return stability, and the sponsor’s own investment stake to gauge alignment.

    Looking ahead, Harkins notes that credit costs and property values remain high due to limited inventory, but falling interest rates could spur inventory growth and potentially depress prices. When a fund raises substantial capital, it must prioritize sound economic decisions, especially if the assets are vulnerable to market shifts. “Investments must justify the expected return,” she says, urging careful evaluation of debt levels, interest‑rate terms, and the overall economic outlook.

    Arzaga views real‑estate investing as a long‑term endeavor. Because property cycles evolve over time, attempting to time sector performance is largely futile. “For long‑horizon investors, the current market can be as productive as any other, provided the fund structure aligns with their needs,” he concludes.

    Scroll below to see the 10 real‑estate funds with the highest and lowest three‑year annualized returns as of August 31, 2025, sourced from Morningstar Direct.