Month: November 2016

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DC Fawcett’s Tips – Real Estate Investment Trust

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Real Estate Investment TrustREIT ( Real Estate Investment Trust ) is an organization or a company which either owns or finances income-generating real estate. Investors get all types of regular income streams, diversification, and long-term capital appreciation from the REIT. These companies pay the taxable income to the shareholders by way of dividend, for which the shareholders have to pay the tax on dividend income. DC Fawcett suggests the investors to choose the right REIT.

Why REIT?

REIT’s are known as total return investments. They provide high dividends and potential for moderate, long-term capital appreciations. They offer

  1. High Dividend Yield

    The dividend yield in a REIT is significantly higher than other equities.

  2. Income and long-term growth

    REIT provides long term returns apart from the returns from other stocks and bonds

  3. Liquidity

    Publicly traded REIT shares can be readily converted into cash as the trading is done in major stock exchanges.

How to choose REIT’s and their financial benefits

An individual might invest in a REIT that is listed on the stock-exchange. They also go to REIT mutual fund or exchange-traded fund. Profitable investment Investors also have the capacity to invest in public non-listed non REITs and private non REITs.

REIT stocks and shares are publicly priced in stock exchange- listed REIT’s like other companies. To assess the investment value of REIT shares, certain aspects are taken into consideration.

  • Anticipated Growth in EPS(Earning per share)
  • Anticipated total return from stock that is estimated from the price change and the dividend yield.
  • Current dividend yields of bonds, utility stocks and other high-income investments.
  • Percentage of dividend payout ratios.
  • Management quality and corporate structure

REIT’s financial benefits

  1.  What is the benefit you get into investing in REIT

    The market rewards the companies that consistently pay the dividend and has a growth in earning-per-share ratio and stock valuation metric. You need to make sure that

    • The company has the ability to increase its earnings unfailingly.
    • REIT management teams are able to reinvest the cash flow quickly and effectively while simultaneously developing other strategies to create new revenue opportunities.
    • Strong operating characteristics that uses the strategies for succeeding in competitive markets like effective corporate governance procedures, conservative leverage, acceptable accounting practices and strong tenant relationships.

  2. Earning measurements and ability to pay dividends

    You need to compare the amount of dividend for the previous and the current quarter and assess how much the company growth has improved in REIT earnings, which are generated by higher revenues, lower costs, and new business opportunities.

  3. REIT role play in retirement savings

    REIT’s are the main aspect when it comes to an investment portfolio and retirement savings. The REIT’s should pay at least 90% of their taxable income to the shareholders by means of dividend, making them a strong income-generating investment.

 Conclusion

In the last decade, investors, who has been investing in commercial real estate has switched on to REIT because of its attractive offers.

 

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Dc Fawcett’ Best Way of investing in commercial real estate investment for beginners

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Commercial real estate investment for beginnersShops, commercial buildings, industries, retail, wholesale, warehouses, hotels and educational institutions come under the commercial property. You can either buy the property directly or indirectly by investing in property companies, developers, house builders or even in funds. However, as a beginner, it might be a daunting task id you don’t have enough funds or have a bad credit. DC Fawcett suggests the best ways for the starters to invest in commercial real estate.

Best Way of investing in commercial real estate investment for beginners

There are so many factors to consider before you think about starting to invest in commercial real estate. One of the main factors is budget and location. Prices for commercial building or complex vary according to the location and area. One of the ways is to ask a professional real estate agent about investing in commercial property. If you are looking to invest in commercial real estate as a beginner, following are the ways.Real estate rating.

  1. Learn what the insiders know

    To be a professional in this trade, you need to think as a professional and take tips from the people who are experienced. You need to know that commercial property is different from the residential property. Even to avail the loan, you make at least 30% down-payment to the commercial property lenders.

  2. Map out an action plan

    The top real estate professionals are able to make out whether the deal is good enough. They make use of exit strategy, i.e. they know what deals they should accept and what not.

  3. Get familiar with key commercial real estate metrics – It consists of:

    1. NOI (Net Operating Income)

      – The commercial property’s NOI is calculated by evaluating the property’s first year’s gross operating income and deducting the operating expenses for the first year

    2. Cap rates – Real estate cap or capitalization is used to calculate the net present value of income generating assets.
    3. Cash-on-cash – Most of the commercial real estate investors rely on financing to purchase properties abide to cash-on-cash strategy in order to compare first-year performance on commercial properties. This approach takes that the investor does not pay 100% cash for the property on one go and won’t keep all the NOI if they have other commitments like paying the mortgage loans. To uncover cash-on-cash, you need to calculate the amount required and stick to your budget

  4. Look for motivated sellers

    Like any other business, the customers’ drives real estate too. You need to find the sellers, who are ready and eager to sell below the market value. Nothing happens or matters in real estate till you find a motivated seller.

  5. Study the neighborhood

    To evaluate the commercial property, you need to study the neighborhood, where it is located in by going to their houses, talking to other neighborhood houses, and looking for the vacancies.

 

Conclusion

Apart from finding and evaluating commercial properties, getting a great price and communication, you need to build a good relationship and rapport with the homeowners.

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How To Calculate Capitalization Rate For Real Estate – DC Fawcett

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Real EstateDC Fawcett Virtual Real Estate investing club

Real estate investors should have a method to derive the property value they’re going to buy. This is required as many times; a person ends up paying more than the expected price which reduces the profit when they are selling the property. The Capitalization rate is determined on the basis of the income from other properties and the recent selling price.

DC Fawcett has advised the investors to use this formula to get the exact value.

What is Capitalization?

It is the rate of return on real estate investment property based on the income you expect the property to generate. In other words, the capitalization rate is used for determining the investor’s potential income on their investment. DC Fawcett Virtual Real Estate Investing Club.

Capitalization Rate Calculation

  1. You can derive the capitalization rate by dividing the net operating income on the investment by the property’s current market value. Here is the formula:

Capitalization rate=Net Operating Income/Current market value.

For example, if the recent selling price of a property is $4, 00,000 and the net operating income is $20,000, the capitalization rate has to be calculated.

  1. Divide the NOI by selling price to get the capitalization rate, i.e. $20,000/4, 00,000 = 0.05 or 5%. All that you need is a calculator.

Selling the property

You should know what price to fix for selling the property taking all the expenses and the cost price into consideration. For instance, you own a small apartment or the plot and want to sell it. However, you do not have the idea of what rate the property has to be sold. For this, you need to check the current rate for the property similar to yours. Though you find the property sold three or four months back, the catch is about the net operating income which is sometimes published in the listing. If you get three property cap rates on an average of 9% and your net operating income is $36,000, the NOI cap rate is:

$36,000/0.09 = $4, 00,000 which is your property value.

The decision is entirely yours whether to ask for the price for the property or take it from the market.

Buying the property

When we buy the property, we are on the other side of the transaction. If you target to buy a small apartment, you should check whether the price quoted for the apartment is worth or not and whether you are being overpriced. If the price is $5, 00,000 and the capitalization rate is 10%, here is the calculation.

$5, 00,000 x 0.1 = $50,000, which is the required net operating income.

The capitalization rate is useful as it helps you to get the information about the investment, so interpretation becomes easy and you get the fair idea when you decide to buy or sell the property. The capitalization also helps you to know what amount you are earning on the property.

Conclusion

There are several reasons to justify the property’s capitalization rate, depending on the location, quality, and the surroundings.

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