REIT Investments – Questions and Answers
Q Will there be capital growth on my investment?
A. An investment in an Apartment REIT is the closest thing to buying apartments directly yourself, but without the hassle. Over the long term, rents will rise with inflation and since investment real estate is valued by its cash flow, capital growth should follow
Q How do I get my money back if I want to cash out?
A. There is a monthly redemption window for investors. See the Offering Memorandum for full deta
Q. Can I borrow to invest?
A. Yes! Many investors can borrow at just 2.25% and invest. We can refer you to a bank, mortgage broker or financial planner that can help you borrow at the lowest rate to invest. This technique is often referred to as the Smith Manoeuver. Properly executed, it is a great way to save taxes and build wealth.
Q. How do I invest in a REIT?
A. Contact us here and we will send you the information you need to invest, including the Offering Memorandum, the Declaration of Trust and the Subscription Agreement. You may also invest through an Investment or Financial Advisor.
Still not convinced a REIT is right for you ? Think again!
Hard Assets - REIT´s invest in hard assets that are made of "bricks and mortar" not" paper" like stocks
Diversification - REIT´s own many properties, providing more stability than if only one property was owned (e.g. for a "do it yourself" investor), often in multiple cities
Income Producing - REIT´s return the income they earn to investors in the form of monthly or quarterly distributions. Our REIT pays its investors monthly.
Tax Advantanges - because REIT´s can depreciate (as capital cost allowance) their buildings each year, distributions are often tax "deferred" and your income may not be taxable until such time as you sell your units, providing you with good tax deferred cash flow while you remain invested
Liquidity - a REIT has better liquidity for you to redeem your investment if you need the cash for other purposes than if you bought an investment property. A REIT often has reserves and/or credit facilities to make redemptions that wouldn´t be available to you if you owned a property directly (e.g. like a "do it yourself" investor). Our REIT has a monthly redemption cycle.
Low Correlation to Stocks and Bonds - In a volatile world, your portfolio needs diversification away from just stocks and bonds. In the long run, real estate returns are not highly correlated to stock and bond returns which reduces your total portfolio risk..
Inflation Protection - Real estate is an excellent hedge against long term inflation as rents tend to move along with prices in the economy
Professional Management - REIT´s employ a professional and dedicated staff to deal with all aspects of operating the properties profitably and increasing long term capital values. This team of professionals has years of experience and specialized skills that are necessary to be successful. There is also a board of trustees that oversees management to protect the interests of investors. A REIT has a board of trustees that is made up of a majority of independent trustees.
Hassle Free - once you invest, there is little that you need to do. Property management, tenant relations, renting, maintenance, mortgage refinancing, acquisitions and due dilligence, capital raising, financial reporting and all other operational issues are taken care of professionally. Most investors have day jobs that would interfere with running a property portfolio optimally.
No Personal Guarantees - as an individual investor, if you bought a property with a mortgage, you would have to personally guarantee it, putting your other assets at risk. In a REIT, it is that REIT that guarantees the mortgages, not investors directly
Small Minimum Investment - to buy an investment property directly, you need to put down larger sums of money than if you invest in a REIT. A 50 unit apartment building could easily cost $3,000,000. With 25% down, and reasonable reserves for contingencies you would need about $900,000 to invest and would need to guarantee personally $2,250,000 in mortgages. Even then you would have all of your investment in one property with no diversification. You can get started in a REIT for substantially less (like $5,000) and invest more over time as your confidence or availability of cash grows
Economies of Scale - a REIT has many economies of scale that an individual investor would never have access to. Because a REIT can buy in bulk and has long established relationships with reputable suppliers and contractors, it can negotiate great rates and pass these savings on to investors
Good Management Creates Value in Real Estate - if you buy a stock or a bond, there is nothing you as an individual investor can do to make the value of that stock or bond go up. Even a professional investor like a mutual fund or pension fund that buys stocks or bonds, has few legal means of making their investment go up in value. Even with well selected purchases, the investor is "betting" that (a) they are smarter than the guy who sold to them, and (b) that the investment will make them money because the market will go up and make them right. As a stock or bond mutual fund investor, you are paying someone to use their skills to try and outsmart other investors that are just as skilled as them. No matter how smart they are, they still don´t have the power to make these stocks or bonds go up in value for their investors. Real estate is one of the only investments in the world in which the asset you own can be upgraded, repositioned and managed to create value for investors. With quality real estate investment professionals on staff, a REIT can constantly look for opportunities to increase the value of its investments by decreasing costs and increasing income. Some examples of this may be energy efficiency upgrades, renovations, building repositioning, economies of scale in purchasing and sourcing, etc. our team has a track record of success in creating value for investors.
Access to Acquisitions - Since the REIT is in the business of real estate and has a team of professionals continually looking for opportunities, a REIT will have investment opportunities that would never be made available to individual investors. With well developed networks of industry contacts, these professional managers continually receive calls about properties for sale, and have the experience to evaluate them to determine which are worth pursuing and which are not
RRSP/RESP/TFSA Eligible -REIT´s are eligible for these types of plans. Given that a large portion of your savings may be in an RRSP, why not use them to invest in real estate. You couldn´t buy an investment property directly in your RRSP, even if you wanted to
Passive Income - It has often been said that real estate provides passive income. It is our experience that real estate investment is anything but passive. You need to actively keep searching the market for the right properties to buy, in the right locations, in the right cities, know how much to pay, what to spend money on, set capital and operating budgets, manage cash flow, manage utility price risk, manage tenant relations, survey market rents to determine what to charge to get the most income out of the property, research the newest technologies to save money, look for new revenue sources (like selling carbon credits, energy co-generation, laundry and parking income), keep an eye on financing opportunities and risks, put contracts out to tender, ensure that contractors do a quality job, maintain the buildings, keep employees trained and happy, keep up with regulatory requirements, deal with evictions and collections, ensure that you meet all property standards, health and fire codes...the list goes on. In other words, real estate investment is a very active business just like any other business. A REIT takes care of all of this for you, making an investment in real estate as passive as it could get.
You Can Borrow to Invest -With interest rates at around 2.25% per annum, it is now easier than ever to borrow (and deduct this interest) to invest to accelerate your wealth building and tax savings. This technique is often referred to as the Smith Manoeuver, and we can help you implement this strategy. |
