Real estate co-investment vs real estate funds: liquidity, fees, control and tax

When someone with €50,000 or more decides they want property exposure without buying a flat, they usually end up weighing two things: a real estate fund offered by their bank or wealth manager, and co-investment in specific deals that reached them through someone they know. The two look alike on the surface (others manage, you put up the capital) and differ in everything that decides the result: who picks the property, what the investor pays even if things go wrong, when they can get out and how the gain is taxed. This article compares both models on those four axes, with the legal limits and real fee levels, and without running anyone down: a well-run fund is a legitimate tool that simply does a different job.

Before comparing, it helps to know which of the three products you are being offered, because they behave very differently:

1. 01Direct real estate fund (Spanish FII). A fund regulated under Spain's collective investment law (Ley 35/2003) that buys property to let (homes, offices, retail) and values it through periodic appraisals. It was the product of the moment until 2008; very few remain open to retail investors in Spain today.
2. 02Listed real estate equity fund. An equity fund that buys shares in listed SOCIMIs and REITs. It owns no buildings; it owns companies that own buildings. It is as liquid as the stock market and moves like the stock market. We cover it in investing in property without buying a flat.
3. 03Closed-end private real estate fund (private equity real estate). A vehicle that raises capital over a year or two, invests it in developments, repositioning of buildings or debt portfolios, and returns it over 7 to 10 years. It usually requires €100,000 or more and is reserved for professional or advised investors.

The comparison below focuses on the first and the third, the ones that genuinely compete with co-investment for the same money: capital that accepts being locked up in exchange for a real property deal.

In co-investment you don't buy units in a portfolio: you enter one identified deal (a specific property, with its purchase price, works budget, expected sale price and estimated timeline) alongside the company that executes it, which puts its own capital into it. The usual legal vehicle is the silent partnership agreement (Spanish cuentas en participación), explained in silent partnerships in real estate investment, and the relationship is documented through a framework agreement plus one addendum per deal, as we detail in what to check in a co-investment contract.

That is Invernova's model: we source the property, buy it, renovate it and sell it within an estimated 12 to 24 months, with a small group of co-investors from €25,000 and our own money in every deal. It is not a fund (there is no portfolio, no net asset value and no management company paid to administer) and it is not a crowdfunding platform either, a difference we cover in real estate crowdfunding vs co-investment.

The classic argument for the fund is that "you can get out". Read the small print. A direct real estate fund is only legally required to honour redemptions once a year, and it may suspend them when requests exceed available cash, because selling a building to pay unitholders takes months. This is not theory: in 2008 and 2009 Spain's largest real estate funds suspended redemptions in the face of mass exit requests, and some took years to return the money while selling their portfolios at the worst point of the market.

Co-investment promises no interim liquidity, and that is its virtue: there are no other unitholders whose exit can drag you down. Your money sits in a property with an estimated sale date, and you are paid when it sells. The risk is that the sale runs late, which has happened in several of our deals; that is why every deal page publishes the estimated term and, for settled deals, the actual one. The practical difference is this: in a fund, liquidity depends on the behaviour of thousands of investors; in co-investment, on the sale of a property you know.

This is the difference that moves the most money and gets explained the least. A fund charges a management fee on assets, every year, regardless of whether the fund gains or loses. The regulation allows a Spanish FII to charge up to 4% a year of assets (or 10% of results, or a combination of 1.5% plus 5%), plus a custody fee of up to 0.4% and entry and exit fees of up to 5%. In practice most charge less than the maximum, but the principle is the same: the management company is paid to administer, not to be right.

The example is indicative (each fund publishes its fees), but it shows the mechanics: a fixed cost of 1.8% a year eats almost a fifth of a 10% gross return. In Invernova's co-investment there is no entry, management or exit fee; the manager earns through its share of the profit when the property sells, and loses its own capital if the deal goes badly. That alignment is not a slogan: it is the structure of the contract.

In a fund you delegate selection entirely. You receive a periodic report with the portfolio composition and a net asset value derived from appraisals, which are a professional opinion of what a property would fetch if sold, not a sale price. When the market falls, the published value tends to lag, which is why so many unitholders asked to leave at once in 2008: the published value no longer matched what the market would pay.

In co-investment, control comes before the investment: before committing money you know which property it is, which town it is in, the purchase price, the works planned, the expected sale price and its LTV, that is, what share of the property's value your capital represents (see what LTV is). You can say no to one deal and yes to the next. And the final result is not an appraisal: it is the price it actually sold for, published deal by deal in the track record. In exchange, you give up the fund's automatic diversification: with €25,000 you enter one deal, not forty, which means looking at each one more carefully.

For a Spanish tax resident individual, both models are taxed in the savings base of personal income tax, on the 19% to 30% scale in force in 2026, but they get there by different routes:

• Real estate fund. A fund meeting the legal requirements pays 1% corporate tax, and you are taxed on redemption as a capital gain on the difference between what you receive and what you paid in, with a 19% withholding. Until you redeem, you pay nothing, and in general you can switch to another collective investment vehicle without triggering tax (the deferral regime of Article 94 of the Spanish income tax law).
• Co-investment through a silent partnership. What you receive above your capital is investment income (rendimiento del capital mobiliario), also in the savings base, with a 19% withholding applied by the manager at settlement. You receive the whole profit in the year of the sale, which can push you into a higher bracket if several settlements coincide; tax on real estate investment explains how to plan for it.
• Offsetting losses. Capital gains and investment income can only be offset against each other up to 25% of the positive balance of one group. If you carry losses from shares or funds, know which box each income will land in before choosing.

For a company, both are simply included in corporate income tax. And in both cases the golden rule is the same: tax decides between two similar investments; it never justifies a bad one. Check your own case with an adviser before moving the money.

There is no winner in the abstract. There are two fairly clear profiles:

• The fund fits if you want to delegate completely, diversify from the first euro, have a supervisor in between and keep the option (not the certainty) of redeeming early. In exchange you accept an annual fee that does not depend on results and a valuation based on appraisals.
• Co-investment fits if you can commit €25,000 or more to one deal without needing that money for a year or two, want to know exactly which property you are in and at what price, prefer a manager who is paid only when there is a profit, and accept that the exit is the sale, not a redemption window.
• If you have the capital for both, they are not mutually exclusive: many co-investors keep funds for the liquid, diversified part and use co-investment for the part of their wealth they want working in specific deals, as we describe in where to invest €200,000.

As of November 2026, our track record shows 49 settled deals with 0 failures, an average realised return of 19.6% and €10.7M returned to co-investors. It also shows that 11 of the 49 deals settled by October 2026 closed below their estimated return: an honest comparison with a fund means looking at that row too.