Are You Considering the Right Real Estate Investment Fund Option?

Invest In a Real Estate Fund

For those seeking Hungarian residency through investment, real estate funds offer a compelling avenue. By investing €250,000 in a qualifying fund, you can obtain a Hungarian Golden Visa. However, not all real estate funds are created equal. Here's what to look for when choosing a fund:

• Regulatory Compliance: Ensure the fund is registered with the Magyar Nemzeti Bank (MNB) and has at least 40% of its assets invested in Hungarian residential real estate.
• Fund Manager Expertise: Verify the fund manager is a qualified Alternative Investment Fund Manager (AIFM) with a strong track record.
• Fund Performance: Review the fund's historical performance and its investment strategy to assess its potential.
• Fees and Liquidity: Understand the fee structure and how easily you can exit the investment if needed.
• Risk Profile: Choose a fund that aligns with your risk tolerance and long-term investment goals.
• 5-Year Commitment: Remember that you must hold the investment for at least five years to maintain residency eligibility.

What to Check Before Choosing a Real Estate Investment Fund?

Regulatory Compliance:

• MNB Registration: Ensure the fund is registered with the Magyar Nemzeti Bank (Hungarian National Bank), the country's central bank. This confirms the fund operates under the required legal framework.
• Investment Focus: Verify that at least 40% of the fund's net asset value is invested in residential real estate located in Hungary. This alignment with the program's requirements is crucial for your residency application.
• Fund Manager: The fund manager must be a recognized entity, listed in the register of qualified market operators under Act XXX of 2016 on Procurement for Defence and Security Purposes. This ensures they meet specific qualifications and standards.

Fund Manager Qualifications:

• AIFM Status: The fund manager should ideally qualify as an Alternative Investment Fund Manager (AIFM) under Act XVI of 2014 on Collective Investment Schemes. This designation indicates expertise in managing alternative investments, including real estate funds.
• AUM Thresholds: Consider the fund manager's Assets Under Management (AUM). AIFMs managing over €100 million (including leverage) or €500 million (for non-leveraged funds with a 5-year lock-up) demonstrate a significant track record. Traditional fund managers with over €600 million AUM in real estate funds also qualify.

Good To Know

The immigration authority does not maintain a register of information about real estate funds or fund managers. Therefore, conducting your own due diligence is crucial.

Additional Considerations for Investors

Beyond regulatory compliance, delve deeper into the fund's specifics:

• Fund Performance: Evaluate the fund's historical performance, considering factors like returns, volatility, and its investment strategy. Past performance is not a guarantee of future results, but it provides valuable insights.
• Fees: Understand the fee structure, including management fees, performance fees, and any other expenses. High fees can significantly impact your overall returns.
• Liquidity: Assess the ease with which you can exit the investment if needed. Some funds have lock-up periods or restrictions on withdrawals.
• Risk Profile: Consider your risk tolerance and choose a fund that aligns with your investment goals. Real estate funds carry varying levels of risk, depending on their investment strategy and the underlying properties.
• 5-Year Holding Period: Remember that you must hold the investment fund units for at least five years to maintain eligibility for residency.

Benefits of Investing in a Real Estate Fund

• Diversification: Real estate funds offer instant diversification by investing in a portfolio of properties rather than a single asset.
• Professional Management: Experienced fund managers handle property acquisition, management, and disposal, relieving you of those responsibilities.
• Accessibility: With a lower investment threshold than direct real estate purchase, funds provide a more accessible entry point to the Guest Investor Program.
• Potential for Passive Income: Depending on the fund's strategy, you may receive regular income distributions from rental yields or property sales.

Challenges of Investing in a Real Estate Fund

• Limited Control: You have less control over individual property choices compared to direct real estate investment.
• Fund Manager Dependence: The fund's success relies heavily on the expertise and performance of the fund manager.
• Fees: Fees can erode your overall returns, so carefully compare different funds before investing.
• Illiquidity: Exiting the investment before the 5-year holding period may be difficult or come with penalties.

Conclusion

Investing in a real estate fund can be a viable pathway to Hungarian residency through the Guest Investor Program. However, it's essential to conduct thorough due diligence, considering regulatory compliance, fund manager qualifications, and the fund's overall investment strategy and performance. By carefully evaluating these factors, you can make an informed decision and choose a fund that aligns with your investment goals and residency aspirations.

Want to consult with an immigration expert to make an informed decision? Contact us!