A property trust allows you to buy 'units' in a property investment operated by a professional investment manager. As the name suggests, unlisted property trusts are not listed on the Australian Securities Exchange (ASX), and have some important differences from listed property trusts, or real estate investment trusts, as they’re now known.

First, it’s harder to know easily what's going on with your investment. For example, you may not be able to see the price of the investment (and whether it is going up or down). The investment is not subject to ongoing supervision by a market supervisor, such as the ASX, and the managers don’t have to furnish as much regular information. Without ASX liquidity, it can be more difficult to get out of an unlisted property trust if you decide to withdraw your money early. If you are allowed to withdraw your money, it is usually subject to strict conditions, and there might be fees for taking out your money early.

But liquidity has a flipside: the big advantage of an unlisted trust is that it will not show the potential volatility of a listed trust. This means an unlisted trust stands a better chance of capturing the true value of a property investment, because its performance is not impacted by non-property factors.

Returns from unlisted property trusts are typically less volatile for investors compared to A-REITs and are known for providing a consistent inflation-linked income stream.

Investors will often receive “tax-deferred” distributions through depreciation benefits associated with property, meaning only a portion of the distribution has to be declared as taxable income in the year it is received. Thus, direct property can be an attractive investment mechanism through which investors can obtain both income and capital growth tax-effectively.

Also, the low correlation with other asset classes gives your portfolio effective diversification benefits.

Before investing, it’s essential to read the product disclosure statement -PDS - of an unlisted property trust, to find out the fees, features, risks and who is managing the trust. Concentrate on the sections that explain the features and risks of the investment, the fees that you will pay, the liquidity policy and the gearing ratio.

Pay particular attention to the gearing ratio, the interest cover ratio and the attributes of the portfolio – and most importantly, the location of the properties and the calibre of the tenants, because that’s where your cash flows will come from.