New property funds don’t stack up

Property funds have proved popular in the past. But with house prices stalling, there's a better way to invest in property. Piper Terrett explains.

One of the main problems with being a buy-to-let landlord is that it's incredibly hard for small investors to diversify. You wouldn't dream of putting all your money into one share, yet amateur landlords frequently have just one or two properties, often in the same area. So the idea of a fund that spreads your risk over a range of properties and takes care of all the other hassles a landlord faces is attractive.

That's what the TM Hearthstone UK Residential Property Fund sets out to do. By buying houses in areas with strong rental demand, it aims to match or exceed the average increase in British house prices. Managers say they'll be able to use the fund's size and its cash-buyer status to negotiate discounts on properties. The minimum investment is £1,000, with an annual fee of 1.5%, although for those investing more than £20,000 this can be cut to 0.75%.

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Piper Terrett is a financial journalist and author. Piper graduated from Newnham College, Cambridge, in 1997 and worked for Germaine Greer and for Adam Faith’s Money Channel before embarking on a career in business journalism. 

She has worked for most top financial titles, including Investors Chronicle, Shares magazine, Yahoo! Finance and MSN Money. She lectures part-time at London Metropolitan University and is the author of four books.