Empirical evidence on the performance of real estate mutual funds is mixed. Moreover, despite the growth of new money cash flows into the funds, research on investor rationales for the same is limited. Recent research in diversified mutual funds suggests that conventional statistics give misleading results and wrongly attribute fund performance to “skill” rather than to “luck.” Using cross-sectional bootstrap methodology for 1990–2009, our estimates show evidence of underperformance. Moreover, it appears that ordinary least squares regressions understate the number of underperforming funds. Our analysis of new money cash flows shows evidence of momentum in fund flows and returns-chasing behavior.