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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO THE SHAREHOLDERS OF VANGUARD REAL ESTATE FUND I,
A SALES-COMMISSION-FREE INCOME PROPERTIES FUND:

Notice is hereby given that the Annual Meeting of Shareholders of Vanguard
Real Estate Fund I, A Sales-Commission-Free Income Properties Fund (the
"Fund"), will be held in the Majestic Building, Room 118A, Vanguard Financial
Center, 100 Vanguard Boulevard, Malvern, Pennsylvania, on Tuesday, April 18,
1995, at 10:30 A.M., Eastern Time, for the following purposes:

I. To elect a Board of Trustees to hold office until the Annual
Meeting of Shareholders in 1996, and until their respective
successors are duly elected and qualified.

II. To consider and vote upon the ratification of the selection of
Price Waterhouse LLP, certified public accountants, as independent
auditors of the Fund for 1995.

III. To consider and act upon any other matters which may properly come
before the meeting.

By Order of the Board of Trustees
Raymond J. Klapinsky, Secretary

March 13, 1995

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YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN

Please indicate your voting instructions on the enclosed Proxy Card, date and
sign it, and return it in the envelope provided, which is addressed for your
convenience and needs no postage if mailed in the United States. In order to
avoid the additional expense to the Fund of further solicitation, we ask your
cooperation in mailing your proxy promptly.
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ANNUAL MEETING OF SHAREHOLDERS

APRIL 18, 1995

PROXY STATEMENT

The enclosed proxy is solicited by and on behalf of the Board of Trustees
of Vanguard Real Estate Fund I, A Sales-Commission-Free Income Properties
Fund (the "Fund"). All costs of solicitation (including printing and mailing
this Proxy Statement, meeting notice and form of proxy, as well as any
necessary supplementary solicitations) will be paid by the Fund. In addition
to the solicitation of proxies by mail, officers and employees of the Fund's
Sponsor may solicit in person or by telephone. Persons holding shares as
nominees will, upon request, be reimbursed for their reasonable expenses in
sending soliciting material to their principals.

Holders of record at the close of business on March 9, 1995, are entitled
to vote at the meeting or at any adjourned session. Each share is entitled to
one vote. As of the record date, there were issued and outstanding
approximately 11,434,145 shares of beneficial interest ("Shares") of the
Fund.

Shares represented by a properly executed proxy will be voted in
accordance with the instructions thereon, or, if no specification is made,
the persons named as proxies will vote such shares for management's slate of
trustees and in favor of the proposals recommended by the Board of Trustees.
Proxies may be revoked at any time before they are exercised by the
subsequent execution and submission of a revised proxy, by written notice of
revocation to the Secretary of the Fund, or by voting in person at the
meeting. The mailing address of the Fund is c/o Vanguard Financial Center,
P.O. Box 2600, Valley Forge, PA 19482.

Shareholders who need directions to the location of the Annual Meeting
should call 1-800-662-7447 between the hours of 8:30 A.M. and 5:00 P.M.,
Eastern time.

A copy of the Annual Report of the Fund for the fiscal year ended December
31, 1994, including financial statements, has been mailed to each shareholder
of the Fund entitled to vote at the meeting. This Proxy Statement is expected
to be mailed to shareholders on or about March 13, 1995.

I. ELECTION OF TRUSTEES

The Fund's Board of Trustees has nominated the five persons listed below for
election as Trustees, each to hold office until the next annual meeting of
shareholders and until his successor is elected and qualified. If any such
nominee is not available for election at the time of the meeting, the persons
named as proxies will vote for such substitute nominee as the Board may
recommend unless the number of Trustees serving on the Board is reduced. All
of the nominees have served as Trustees of the Fund since the Fund's
inception and were elected by shareholders. Each nominee has consented to
being named in this Proxy Statement and to serve as a Trustee if elected.
Each of the nominees also serves as a Trustee of Vanguard Real Estate Fund
II, A Sales-Commission-Free Income Properties Fund ("VREF-II").

Share Holdings
as of
March 9, 1995
Principal Occupation, Year First -------------------------
Business Experience and Became a Percent of
Name Age Other Directorships Trustee Number Class
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John C. Bogle........... 65 Chairman and Chief Executive Officer 1986 5,000 .04%
of the Fund, VREF-II, The Vanguard
Group, Inc. and each of the
investment companies in The Vanguard
Group; Director of The Mead
Corporation and General Accident
Group of Insurance Companies.

J. Mahlon Buck, Jr.(1).. 69 Chairman and President of TDH Capital 1986 5,000 .04
Corporation; Director of Alco
Standard Corporation.

William S. Cashel, Private investor; formerly Vice 1986 None None
Jr.(l) ................ 74 Chairman of American Telephone and
Telegraph Company.

David C. Melnicoff(l) .. 75 Adjunct Professor of Finance School 1986 None None
of Business, Temple University;
Director of General Accident Group of
Insurance Companies; Trustee of
Cortland Trust; formerly Executive
Vice President of Meritor Financial
Group.

J. Lawrence Wilson ..... 59 Chairman and Chief Executive Officer 1986 5,000 .04%
of Rohm & Haas Company; Director of
Cummins Engine Company; Trustee of
Vanderbilt University and the Culver
Educational Foundation. Director
(Trustee) of The Vanguard Group, Inc.
and each of the investment companies
in The Vanguard Group.

- ------
(1) Unaffiliated Trustee.

BOARD MEETINGS AND COMMITTEES

During the fiscal year ended December 31, 1994, the Fund's Board of Trustees
held three meetings.

The Board has an Audit Committee, which is comprised of Messrs. Buck, Cashel
and Melnicoff. During the fiscal year the Committee held one meeting. The
Committee is responsible principally for: (1) selecting the Fund's
independent accountants, and reviewing their fees; (2) meeting with the
Fund's independent accountants for the purpose of reviewing the adequacy of
the Fund's internal accounting controls; and (3) reviewing and monitoring, in
consultation with management and the Fund's independent accountants, the
Fund's continuing qualification under the Internal Revenue Code as a "real
estate investment trust" and compliance with the real estate investment trust
provisions of the Internal Revenue Code.

PRINCIPAL EXECUTIVE OFFICERS

In addition to Mr. Bogle, who is Chairman and Chief Executive Officer of the
Fund, the officers of the Fund are as follows:

Name Age Office
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John J. Brennan ....... 40 President (since 1989); Vice President
(1986-1989); President of VREF-II; Director
(Trustee) and President of The Vanguard
Group, Inc. and each of the investment
companies in The Vanguard Group.

Ralph K. Packard ...... 50 Vice President and Controller (since 1988);
Vice President and Controller of VREF-II;
Senior Vice President and Chief Financial
Officer of The Vanguard Group, Inc.

Richard F. Hyland ..... 57 Treasurer (since 1986); Treasurer of
VREF-II, The Vanguard Group, Inc. and each
of the investment companies in The Vanguard
Group.

Raymond J. Klapinsky... 56 Secretary (since 1989); Secretary of
VREF-II; Senior Vice President (Legal) and
Secretary of The Vanguard Group, Inc.;
Secretary of each of the investment
companies in The Vanguard Group.

REMUNERATION OF TRUSTEES AND OFFICERS

The Fund pays each Trustee, who is not also an officer, an annual fee of
$4,000, plus $1,000 for each meeting attended. The Fund also reimburses the
Trustees for travel and other expenses incurred in attending Board meetings.
Officers of the Fund receive no remuneration for their services.

COMPENSATION TABLE

Pension or Estimated Total
Retirement Annual Compensation
Aggregate Benefits Accrued Benefits From
Compensation As Part of Upon All Vanguard
Names of Trustees From Fund Fund Expenses Retirement Funds
- ----------------------- -------------- ---------------- ------------ --------------

John C. Bogle* .......... $ -- $ -- $ -- $ --
J. Mahlon Buck, Jr....... $8,000 $ N/A $ N/A $16,000
William S. Cashel, Jr.... $8,000 $ N/A $ N/A $16,000
David C. Melnicoff ..... $8,000 $ N/A $ N/A $16,000
J. Lawrence Wilson** .... $7,000 $ N/A $ 15,000 $65,000

* As an "Interested Trustee," Mr. Bogle receives no compensation for his
service as a Trustee.

** Mr. Wilson is also a director (trustee) of each of the over 30 funds
comprising the Vanguard Group of Investment Companies.

II. RATIFICATION OF SELECTION OF
INDEPENDENT ACCOUNTANTS

The Trustees have selected Price Waterhouse LLP as independent accountants of
the Fund to serve for the fiscal year ending December 31, 1995. Price
Waterhouse LLP has served the Fund in this capacity since the Fund's
inception. The audit services expected to be provided by Price Waterhouse LLP
for the current fiscal year include work in connection with the expression of
an opinion on the Annual Financial Statements of the Fund and review of the
Fund's Annual Report to Shareholders.

A representative of Price Waterhouse LLP will be present at the meeting if
requested by a shareholder (either in writing or by telephone) in advance of
the meeting. Such requests should be directed to the Secretary of the Fund.

An affirmative vote of a majority of the shares of the Fund represented at
the meeting is required to ratify this appointment.

CERTAIN TRANSACTIONS WITH THE SPONSOR

THE VANGUARD GROUP, INC.

The Vanguard Group, Inc., headquartered in Valley Forge, Pennsylvania, is the
sponsor of the Fund (the "Sponsor"). John C. Bogle, Chairman and Chief
Executive Officer of the Fund, and John J. Brennan, Ralph K. Packard, Richard
F. Hyland and Raymond J. Klapinsky, the principal executive officers of the
Fund, are also officers of the Sponsor. The Sponsor is wholly-owned by over
thirty mutual funds comprising The Vanguard Group of Investment Companies
("The Vanguard Group"). Through the Sponsor, each of the mutual funds in The
Vanguard Group obtains at cost virtually all of its corporate management,
administrative and distribution services. The Sponsor, a registered

investment adviser under the Investment Advisers Act of 1940, also provides
investment advisory services on an at-cost basis to several of the mutual funds
in The Vanguard Group, including Vanguard Money Market Reserves. On February 27,
1995, the Fund had approximately $4,043,545 invested in shares of the Prime
Portfolio of Vanguard Money Market Reserves. The Sponsor employs a supporting
staff of professional management and administrative personnel to provide the
requisite services to the mutual fund members of The Vanguard Group, and the
Sponsor also furnishes each of those funds with office space, furnishings and
equipment. At March 9, 1995, total net assets of the mutual funds comprising The
Vanguard Group exceeded $130 billion.

THE SERVICES AGREEMENT

The Fund, with the approval of the Trustees, including all of the
unaffiliated Trustees, has entered into a contract with the Sponsor (the
"Services Agreement"), under which the Sponsor is obligated to provide
administrative services for the Fund and to conduct the Fund's day-to-day
affairs. The Trustees have continuing exclusive authority over the management
of the Fund, the conduct of its affairs and the management and disposition of
the Fund's property. Subject to their duty of overall supervision, however,
the Trustees have delegated to the Sponsor the power and duty to (i) perform
necessary administrative functions in the management of the Fund; (ii)
maintain bank accounts, and arrange for fidelity bonds with respect to
fraudulent and negligent acts, errors and omissions, in amounts specified by
the Trustees, covering all of the personnel handling funds and other assets
of the Fund, with the Fund named as an insured party; (iii) maintain
financial records of the Fund deemed appropriate or requested by the
Trustees; (iv) maintain necessary shareholder records; (v) prepare and
distribute communications to Shareholders; (vi) advise the Fund with respect
to its temporary investments; (vii) review real estate investments selected
by the Fund's investment adviser to assure that such investments comply with
the Fund's investment policies and guidelines; and (viii) provide to the Fund
office space and equipment and executive and office personnel.

The Services Agreement continues until December 31, 1995. The Services
Agreement may be renewed annually by the Fund, subject to a determination
pursuant to the Declaration of Trust by a majority of the unaffiliated
Trustees that the Sponsor's performance has been satisfactory. The Services
Agreement may be terminated for any reason upon 60 days' written notice by a
majority of the Trustees or by a majority of the unaffiliated Trustees, and
upon 60 days' written notice by the Sponsor.

COMPENSATION TO THE SPONSOR

Subject to certain limitations, the Services Agreement provides that the Fund
will pay the Sponsor (i) an annual administrative fee equal to .45% of the
average fair market value of the Fund's real estate investments and adjusted

temporary investments (which exclude investments in Vanguard Money Market
Reserves--Prime Portfolio) for such year for the portion of such average fair
market value less than or equal to $50.0 million and .35% of the average fair
market value of the Fund's real estate investments and adjusted temporary
investments (which exclude investments in Vanguard Money Market Reserves--Prime
Portfolio) for such year for the portion of such average fair market value
exceeding $50.0 million, payable quarterly; and (ii) a subordinated incentive
fee equal to 5% of any "excess net proceeds." Unless Shareholders have received
an amount per Share equal to their original capital investment plus a cumulative
average simple annual return on their adjusted capital investment of 10%, a
subordinated incentive fee will not be payable. "Excess net proceeds" is that
amount by which cumulative net proceeds from sale or repayment from all of the
Fund's real estate investments available for distribution (before deducting such
subordinated incentive fee) exceed an amount equal to Shareholders' aggregate
original capital investment plus any deficiency in a cumulative average annual
simple return to Shareholders of 10% on their aggregate adjusted capital
investment. The subordinated incentive fee, if any, shall be paid concurrently
with the payment to Shareholders of the distribution to which such fee relates.
Cash held by the Fund for investment, working capital, dividends and other
purposes may be temporarily invested in a money market mutual fund affiliated
with the Sponsor.

During the fiscal year ended December 31, 1994, the Fund paid an annual
administrative fee of approximately $269,000 to the Sponsor.

The amount of the annual administrative fee otherwise payable to the Sponsor
in any fiscal year is subject to downward adjustment in the event certain
limitations on total operating expenses of the Fund are exceeded.

CERTAIN TRANSACTIONS WITH THE ADVISER

ALDRICH, EASTMAN & WALTCH, INC.

Aldrich, Eastman & Waltch, Inc., headquartered in Boston, Massachusetts, is
the investment adviser to the Fund (the "Adviser"). The Adviser is a
registered investment adviser under the Investment Advisers Act of 1940, and
advises clients in connection with the creation and management of real estate
investment portfolios. The Adviser also serves as investment adviser to
VREF-II. At December 31, 1994, the Adviser had approximately $4.4 billion of
client capital invested in real estate or real estate related trusts.

The principal officers of the Adviser are Peter C. Aldrich, Executive
Director; Thomas G. Eastman, Executive Director; and Joseph F. Azrack,
Executive Director.

On March 20, 1991, the Adviser entered into an agreement with United Asset
Management Corporation ("UAM"), One International Place, Boston,
Massachusetts 02110, under which UAM acquired a minority (less than 15%)
interest in a new limited partnership (Aldrich Eastman & Waltch a Delaware
Limited Partnership) formed by the Adviser. UAM is a holding company
incorporated in Delaware in December 1980 for the purpose of acquiring firms
engaged primarily in institutional investment management. The Adviser has
informed the Fund that it will continue to act independently of UAM and that
UAM will not exercise control over the operations of the Adviser.
Accordingly, the day-to-day investment operations of the Fund will continue
to be managed by the Adviser using the same personnel and investment
philosophy, Aldrich, Eastman & Waltch, L.P. has entered into a sub-advisory
agreement with the Adviser with the approval of the Fund.

THE ADVISORY AGREEMENT

The Fund, with the approval of the Trustees, including all the unaffiliated
Trustees, has entered into a contract with the Adviser (the "Advisory
Agreement"), under which the Adviser is obligated to present an investment
program to the Fund and use its best efforts to obtain investments suitable
to such program. Although the Trustees have continuing exclusive authority
over the management of the Fund, the conduct of its affairs and the
management and disposition of the Fund's assets, the Trustees have delegated
to the Adviser the power and duty to (i) locate and analyze real estate
investment opportunities; (ii) structure the terms and conditions of purchase
transactions; (iii) make real estate investments, subject to the Fund's
investment objectives and policies; (iv) dispose, refinance and make other
changes in assets or capital structure of the Fund's real estate investments;
(v) oversee outside property managers and other independent third parties
(e.g., appraisers, engineers, etc.); and (vi) undertake accounting and other
record-keeping functions at the property level.

The Advisory Agreement continues until December 31, 1995. The Advisory
Agreement may be renewed annually by the Fund, subject to a determination
pursuant to the Fund's Declaration of Trust by a majority of the unaffiliated
Trustees that the Adviser's performance has been satisfactory. The Advisory
Agreement may be terminated for any reason upon 60 days' written notice by a
majority of the Trustees or by a majority of the unaffiliated Trustees, and
upon 60 days' written notice by the Adviser.

COMPENSATION TO THE ADVISER

Subject to certain limitations, the Advisory Agreement provides that the Fund
will pay the Adviser (i) an Adviser's acquisition fee equal to (a) 2% of the
purchase price of the Fund's real estate investments not constituting junior
mortgage loans or (b) 5% of the purchase price of real estate investments
consisting of junior mortgage loans (such amount not to exceed 2% of the fair
market value of the underlying property); (ii) an annual advisory fee equal
to .50% of the average fair market value of the Fund's real estate
investments, payable quarterly; (iii) an investment financing fee equal to
.65% of any financing or refinancing proceeds received from third parties by
the Fund with respect to any real estate investment, provided that such
proceeds were not obtained in connection with, or are not directly related
to, the initial acquisition by the Fund of such real estate investment; (iv)
a disposition fee equal to 2% of the net proceeds from sale or repayment
received by the Fund with respect to each real estate investment; and (v) a
subordinated incentive fee equal to 10% of any "excess net proceeds." Unless
Shareholders have received an amount per Share equal to their original
capital investment plus a cumulative average simple annual return on their
adjusted capital investment of 10%, a subordinated incentive fee will not be
payable. "Excess net proceeds" is defined under the caption "Certain
Transactions with the Sponsor--Compensation to the Sponsor." The subordinated
incentive fee, if any, shall be paid concurrently with the payment to
Shareholders of the distribution to which such fee relates.

During the fiscal year ended December 31, 1994, the Fund paid advisory fees
totaling approximately $305,000 to the Adviser.

The amount of the annual advisory fee otherwise payable to the Adviser in any
fiscal year is subject to downward adjustment in the event certain
limitations on total operating expenses of the Fund are exceeded.

ADDITIONAL INFORMATION

SUBSTANTIAL SHAREHOLDERS

No person is known to the Board of Trustees and the management of the Fund to
beneficially own (as that term is defined in the Securities Exchange Act of
1934) more than 5% of the Shares. On March 9, 1995, the officers and Trustees
of the Fund in the aggregate (9 persons) owned or controlled 16,500 Shares
(0.14%).

ANNUAL REPORT

The Fund's Annual Report to Shareholders for the year ended December 31,
1994, has been mailed to shareholders entitled to vote at this Annual
Meeting.

SHAREHOLDER PROPOSALS

The next Annual Meeting of Shareholders is scheduled to be held in April
1996. Shareholder proposals for inclusion in the Fund's Proxy Statement for
the 1996 Annual Meeting must be received by the Secretary of the Fund at its
principal executive offices no later than January 1, 1996.

Raymond J. Klapinsky
Secretary
March 13, 1995

100% Recycled
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VOTE THIS PROXY CARD TODAY!
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YOUR PROMPT RESPONSE WILL SAVE YOUR FUND
THE EXPENSE OF ADDITIONAL MAILINGS

(Please fold at perforation, then detach before mailing)
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VANGUARD REAL ESTATE FUND I ("FUND")
PROXY SOLICITED BY THE BOARD OF TRUSTEES

The undersigned, revoking previous proxies, hereby appoints John J. Brennan,
Raymond J. Klapinsky, and Jeffrey S. Molitor, or any one or more of them,
attorneys, with full power of substitution, to vote all shares of the Fund
which the undersigned is entitled to vote at the Annual Meeting of
Shareholders to be held in the Majestic Building, Room 118A, Vanguard
Financial Center, 100 Vanguard Boulevard, Malvern, PA on April 18, 1995 at
10:30 A.M., E.S.T. and at any adjournments thereof. All powers may be
exercised by a majority of said proxy holders or substitutes voting or
acting or, if only one votes and acts, then by that one. This Proxy shall be
voted on the proposals described in the Proxy Statement as specified on the
reverse side. Receipt of the Notice of the Meeting and the accompanying Proxy
Statement is hereby acknowledged.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE

NOTE: Please sign exactly as your name
appears on this Proxy. When signing in a
fiduciary capacity, such as executor,
administrator, trustee, attorney, guardian,
etc., please so indicate. Corporate and
partnership proxies should be signed by an
authorized person indicating the person's
title.
DATE
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Signature(s) (and Title(s), if applicable)

Please refer to the Proxy Statement discussion of each of these matters.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSALS.
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As to any other matter, said attorneys shall vote in accordance with their
best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
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1. To elect the five nominees / / FOR all nominees / / WITHHOLD
specified below as Trustees: listed (except as authority to
John C. Bogle, J. Mahlon Buck, Jr., marked to the vote for all
William S. Cashel, Jr., David C. contrary below) nominees
Melnicoff, and J. Lawrence Wilson

(Instruction: To withhold authority to vote
for any individual nominee(s), write the
name(s) of the nominee(s) on the line below.)

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2. To ratify the appointment of Price FOR / / AGAINST / / ABSTAIN / /
Waterhouse LLP, as auditors of the
Fund.