Risks of buying an apartment from an investment fund: What you need to know

In recent years, real estate investment funds have started to shine and increased their presence in the Spanish market. These large financial entities have acquired apartment blocks as well as properties at competitive prices, arousing interest among individuals looking to buy a home or even invest in properties with good locations.

However, despite how good it sounds and the opportunities they might offer, buying an apartment from an investment fund carries certain risks that are important to know.

What is a real estate investment fund?

A real estate investment fund is an entity that manages large amounts of capital from multiple investors to acquire and manage properties for commercial or residential purposes.

Within this context, funds do not necessarily aim to sell to individual buyers, but generate returns through rental income, appreciation, or future asset sales. In fact, their growing influence in the Spanish real estate market has opened up opportunities for buyers, though it has also introduced new dynamics into property transactions.

Main risks when buying an apartment from an investment fund

While investment funds can offer attractive prices and certain benefits that cloud our attention to the risks, there are some important risks that need to be taken into account:

• Complex contractual conditions - This is often overlooked, but contracts with investment funds include more restrictive clauses than those from traditional sellers. How does this affect you? There may be certain limitations in negotiating or even accepting properties with prior encumbrances.
• Difficulty in negotiating - Investment funds, dealing with large volumes of assets, tend to have less flexibility in adjusting prices or including improvements in the property.
• Possible tenant issues - Imagine one of the more complex situations: the property you buy is occupied. As the new owner, you will inherit legal or contractual issues with current tenants. Therefore, it is important to verify the situation before finalizing the purchase.
• Lack of maintenance - In some cases, properties acquired by funds may have maintenance issues, especially if the fund focuses on short-term profitability.

At Inversa, we always emphasize to buyers the importance of thoroughly reviewing contracts and the property's condition before making any decisions.

Potential benefits when buying from an investment fund

However, let's not just focus on the risks. Buying an apartment from an investment fund also has positive points that can bring significant benefits:

• Access to competitive prices - Funds, managing large property portfolios, may be willing to sell assets at reduced prices. This way, they can free up capital or improve their liquidity. This could be an opportunity for buyers looking for good deals in the market.
• Properties in key locations - It's important to note that many investment funds acquire properties in strategic or high-demand areas. This means that the buyer can access properties with high potential value.

What should you review before buying from investment funds?

To minimize risks, there are several key elements to review before closing the purchase of a property from an investment fund:

• Property history - Check to make sure the property has no encumbrances, ongoing litigations, or tenant rights. Lack of transparency in these aspects could affect your decision.
• Property condition - Inspect and evaluate the property carefully to ensure it's in good condition. It's advisable to conduct a technical audit to avoid surprises later.
• Contractual conditions - Make sure to read every clause of the contract carefully and consult with a specialized real estate lawyer to avoid accepting unfavorable conditions.

Is buying from an investment fund advisable?

Buying an apartment from an investment fund can be an attractive option if the risks and opportunities are properly evaluated. While it's true there are risks related to contractual clauses or lack of maintenance, we must not lose sight of the potential benefits that could make this option viable for many investors.

At Inversa, we understand that investment decisions must be based on a clear evaluation of risks and benefits. Therefore, if you're interested in buying property from an investment fund, our financing services can be key in facilitating the acquisition.

We offer alternative investment solutions so that you can diversify your capital safely and profitably. Feel free to contact us for any questions, and we will be happy to guide you through the process and answer all your queries in the most comfortable and secure way possible.