What is direct property investment? And should I invest?

In Australia, we often use the term direct property investment to describe buying real estate without going through the share market. Direct property investment is popular, comes in many shapes and forms, and can be a compelling alternative—or complement—to shares.

What is direct property investment?

Direct property investment is investment in real estate, either by acquiring an asset in your own name (or a business or trust you control) or by purchasing units in what’s known as a direct property fund.

Direct property includes assets such as commercial real estate (office, retail, bulky goods, large format retail, and industrial property investment) or residential real estate, including apartments, apartment buildings, or the average house on the street. Direct property investment has the ability to generate attractive returns for investors.

Residential assets are generally sought for long-term capital growth with modest income, while commercial assets are typically targeted for higher income potential and longer, structured leases.

What are direct property funds?

For investors who want a slice of a high-quality asset without going it alone, direct property funds can be a great fit. Also known as property syndicates, unlisted property trusts or unlisted property funds, these structures pool capital from investors to acquire high-yielding, institutional-grade real estate. At Properties & Pathways, we specialise in this model, giving investors access to opportunities they couldn’t achieve on their own.

Advantages of investing in a direct property fund

Here are the top reasons investors choose to place their capital in a managed direct property fund:

1. Better investment opportunities

Funds are often among the first to hear when premium properties are coming to market. Many of the best assets are never publicly advertised, so access is limited to those already in the network.

2. Invaluable experience

Managers of direct property funds understand the acquisition, capital raising and valuation process. This means they can extract the best possible outcome from every potential purchase. You get access to deals and expertise without lifting a finger.

3. Improved financing options

Direct property funds often have long-established relationships with lenders, which means better financing terms and faster turnaround times. This is critical when competing for premium assets where speed matters.

4. Lower overheads

Established relationships with service providers often translate into tangible cost savings for the investor. Funds can negotiate lower fees with their scale, compared to one-off investors.

5. A “set and forget” investment

The property fund handles the day-to-day running of the asset, from maintenance through to major value-add projects and lease negotiations. Investors receive regular reporting and distributions without being hands-on.

6. Diversifies your portfolio

Investing through a syndicate or property fund allows you to spread your capital and gain exposure to multiple tenants or assets. This diversification reduces concentration risk and increases financial security.

Direct property vs Listed property

Direct property investment can be in either unlisted or listed property. Unlisted property—sometimes called off-market property—is where many investors focus, thanks to the benefits of reduced competition and the chance to negotiate better value. These opportunities are usually found through networks built over years in the property industry.

The benefits of unlisted property include:

• Less chance of negotiation battles with competing investors
• More opportunity to find value-add potential
• Better chance of securing high-quality real estate at fair prices

Listed property, by contrast, is publicly advertised—whether on property portals, in newspapers or via campaigns. While transparent, it comes with heavy competition from individual investors through to institutions, which can drive prices higher. While listed property can still deliver value, unlisted opportunities are generally considered more attractive for those seeking exclusivity and pricing power.

Things to consider before investing in direct property funds

There are important factors to weigh up before investing:

• Direct property investments are usually long-term, often five to seven years or more depending on the strategy;
• These investments are illiquid, meaning they can’t easily be converted to cash. However, this illiquidity often comes with the benefit of greater stability and reduced exposure to short-term market swings compared to shares.

How to invest in a direct property fund in Australia?

Joining a direct property fund gives investors access to institutional-quality property without the hassle of managing it themselves. The key is choosing the right fund manager. Look for a manager with skin in the game, a transparent fee structure, a proven track record, and clear communication with investors.

Whether you’re an experienced investor or just getting started, get in touch with Properties & Pathways today to learn more about building your wealth through direct property investment.