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Real estate investing for toe-dippers

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People who buy their own homes are, in a way, real estate investors. So, of course, are those who buy part of a shopping center or office building through a limited partnership or a real estate investment trust.

Now, someone who doesn't have enough cash to make the down payment on a house or to buy into a limited partnership can use a mutual fund to invest in real estate. At least four mutual fund companies offer real estate investments, giving small investors access to a sometimes risky arena that has been largely controlled by syndicators and other specialists.

Not all of these companies are actually offering mutual funds of open-ended investment vehicles where investors can buy or sell shares whenever they like. But they all have fairly low minimum investment requirements and a diverse portfolio.

Of the four, only those offered by National Securities and Research Corporation in New York and Fidelity Investments in Boston fit the traditional definition of a mutual fund, where a portfolio manager buys or sells real estate investments to match sales and redemptions by investors.

As for the other two, Vanguard Group's Real Estate Fund I in Valley Forge, Pa., is a real estate investment trust (REIT) and the Baltimore-based T.Rowe Price Realty Income Fund III is a limited partnership.

``I can't emphasize enough the point that this is different from a typical fund,'' says Vanguard vice-president Brian Mattes. ``The main difference is that it's not liquid. Your money is tied up for the first two years at least. You should really expect to be tying up your money for a few years.''

Both Vanguard and the T.Rowe Price Realty Income Fund invest in commercial real estate directly.

``We buy office buildings, business parks, industrial buildings - this includes warehouses or distribution centers - or retail buildings,'' says Michael Daley, a spokesman for T.Rowe Price. ``We only buy on an all-cash basis, so we incur no debt.''

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