Five types of REITs and how to invest in them - The Globe and Mail

Real estate investment trusts (REITs) are a key consideration when constructing any equity or fixed-income portfolio. They provide greater diversification, potentially higher total returns and/or lower overall risk. In short, their ability to generate dividend income along with capital appreciation make them an excellent counterbalance to stocks, bonds and cash. REITs generally own and/or manage income-producing commercial real estate, whether it's the properties themselves or the mortgages on those properties. You can invest in the companies individually or through an exchange-traded fund or mutual fund. There are many types of REITs available. Here we look at a few of the main ones and their historical returns. By the end of this article you should have a better idea when and what to buy. (For a primer on buying real estate, take a look at Simple Ways To Invest In Real Estate.)

Historical Returns

Real estate investment trusts are historically one of the best-performing asset classes available. The FTSE NAREIT Equity REIT Index is what most investors use to gauge the performance of the U.S. real estate market. Between 1990 and 2010, the index's average annual return was 9.9%, second only to mid-cap stocks, which averaged 10.3% per year over the same period. In comparison, fixed income assets managed 7% annual returns and commodities just 4.5% a year. Real estate was the worst performer of eight asset classes in just two years out of 20. Fixed income, on the other hand, was the worst performer six times in the same 20-year period. Historically, investors looking for yield have done better investing in real estate than fixed income, the traditional asset class for this purpose. A carefully constructed portfolio should consider both. (Learn more in How To Assess A Real Estate Investment Trust.)

Trends In Real Estate Investing | World Finance News

Timing may be everything, but is now the right time to invest in real estate, given the steep declines seen in the housing marketing in recent months?  Some real estate investment professionals seem to think so.  In fact, the smart investors are buying, buying, buying properties right now.  Why? 

“First, let’s define what we mean by “investing,” says real estate mentor and author Minh Pham, whose popular real estate seminars pack convention rooms with novice real estate investors eager to learn how to make money with real estate.  “Are you intending to be a knowledgeable, well-educated buyer of under-priced properties and stay in the real estate market for the long term in order to see excellent returns?  Or are you looking for a ‘get-rich-quick’ scheme?  If so, my real estate seminars are not for you.” 

Pham explains that buying a cheap property in the hopes of immediately reselling for a lot more than you paid is speculating, not investing.   And speculating is as risky as buying a lottery ticket.  No credible real estate investment coach will teach you how to speculate, because there is no way to guarantee profits. 

But that doesn’t mean you can’t start seeing profits in a fairly short space of time – you just need to know what you are doing.  

Becoming a successful real estate investor involves getting educated, doing excellent research, and putting together a well-thought-out strategy.   This may seem like homework to some, but for those who have done it the financial rewards are more than making up for the time spent learning.   

“Can you make money in real estate in a down economy?  Absolutely.  Can you do it without knowing what you are doing?  Absolutely not,” says Pham. “Worst case scenario, you could lose thousands of dollars and end up being very disillusioned, as many people are right now as a result of not really understanding what they were doing.  There are rules to any game, and if you don’t take the time the learn them you could lose your money.” 

According to Pham and other real estate investing experts, in order to be successful it’s important to learn how to make money in both ‘up’ and ‘down’ markets. You need survival strategies for when the economy is bad, and know how to win in a competitive market when the economy is booming.   “Don’t fear the competition – embrace it,” advises Pham.  “If you see a lot of investors competing for deals, then know you’re not the only one that sees the potential for profit.  There are more than enough good deals to go around. At any given time there are hundreds of properties for sale in local market niches, enough for every savvy investor to make the profits they’re looking for.  

Even in today’s uncertain climate, novice real-estate investors are making money, especially in smaller properties that are easy to acquire and manage.  Owning property that pays for itself is what it’s all about.  But how do you find those kinds of properties, and how do you recognize them when you do?  “Ah, you’ll have to come to one of my seminars,” grins Pham.   

Minh Pham’s next real estate investing seminar will be held in Alexandria, VA on March 14th, 2009.  He will be giving away his real estate investing handbook, “Turnkey Profits Using Lease Purchase, Subject To’s and Other Creative Real Estate Investing Techniques” to seminar attendees.  To reserve a seat go towww.realestatementoring.eventbrite.com.

MAKE A BLAST IN MAKING THE BEST REAL ESTATE DEALS - Rehab-Real-Estate

As consumers, we always want to buy stuff that is worth the money.  Most often than not, we engage ourselves to something that is worth our time. Right? So, let me tell you about a product that is not only worth your money but also worth your time. Well, I’m going to talk about Jason Medley’s training in looking for a private money lender.

As someone who is into real estate industry, to take part on that event will shed not just knowledge and skills but definitely enhance your profit in the long run. Why? Given that you have the knowledge and skills gain from this one-of-a-kind product, then it follows that you make the right move and decisions and eventually reap remarkable profits.

Let me give at least two products of Jason Medley which I personally used. Well, until now I refer to it as a guide. Here are the two effective and worth the dime products which I would like to recommend:

Find Private Lenders NOW Home Study Course

This product has given me the unlimited access to trained staff to help answer to all of my questions regarding the Find Private Lenders NOW System. Well, this product, if you have this a bit of tight schedule, is the one for you. If you feel like to continue learning everything at home still, this product is a good buy.

 

4 Week Live Training Calls with Jason Medley 

This product, as it was described by us who have availed it, is a “kick in the pants” that many of the real investors need to assure that we get the adequate guidance for us to execute the learning immediately.

This training will provide real estate investors the know-how to find private lenders so that they can use their funds for their real estate deals.  Have you ever thought that if you had private money (and not hard money), funding your deals would be much easier, and you could close many more deals than ever before? Jason Medley will show exactly how to find private lenders who have already funded real estate deals and want to fund yours.

However, you may find the following products focusing on the same stuff when it comes to the content as all of them are pretty much engaged on learning the ways to locate private lenders and the do’s and don’ts if you are to close a deal, which you may ask yourself of this question: What’s the point of availing those products that will just talk about the same thing? Or Isn’t that a waste of money?  Well, I for a time, have asked myself that question BUT then took the risk to avail both the products and found the answer. 

The products may seem to be containing the same information but indeed, they are interrelated that both will give you the boost in closing the deals with your chosen private lenders.

I can really guarantee you that this training will serve as your primary tool in making a big leap in your career in real estate. Become one of us who transcend in making the best real estate deals!

Avail this product/training at its affordable price! I can attest that it’s indeed worth the money and surely worth the time.   

Aug 12, 2010 1:06:33 AM

Back to Basics on Buy and Hold

This past week was spent catching up with friends we haven’t seen in awhile. When these old friends ask what we’re up to, they aren’t surprised to find out it’s real estaterelated, given that we began investing in real estate in 2001. While most have heard the stories of ourcrack house adventures in the early days, they are startled to learn that my husband Dave and I are full time investors.

A few made comments about how “lucky” we were to begin investing 2001 because we rode a really rocking wave of value increases on those properties. And a few commented on how they wouldn’t be buying houses right now because they think the values are going to go down again.

I tried to explain to a few interested folks that appreciation is icing on the cake but it’s not actually the foundation of what we do. But most people seem pretty hung up on house values and what the values will do in the future … and I suspect there are still real estate investors out there that get caught up in these thoughts too so I thought it was time to remind everyone of the basics of buy and hold real estate investing.

There are three ways to make money as a buy and hold investor and one big bonus many forget to think about too!

Appreciation is the way that captures an audience. Who doesn’t love hearing stories about home prices doubling and people making big bucks on a quick flip? It’s a great story.

But we never set out to make money through big property value appreciation. Because we do a lot of market research and carefully select the areas we buy in, we often see solid growth in the value of the properties we buy, but that is not our number one focus for making money. We’ve always focused on a more long term strategy which sees us making cash flow each month and building our wealth by other people (our renters) paying down our mortgages.

That’s it. Appreciation is obviously pretty nice but it’s not the foundation of what we do.

Let’s look at a basic example. Pretend you found a nice property for $100,000 two years ago, and you bought it for 25% down ($25,000). Today, here’s how your investment looks:

1) Depreciation: Bad news, your property went down in value by 5%. It’s now worth $95,000.

2) Cash flow: Rent each month is $1,000. Your mortgage, insurance, taxes and miscellaneous expenses are $800/month. Income minus expenses = $200/month. 24 months x $200 = $4,800 in income so far.

3) Other people’s money paying down your mortgage: Assuming you have a mortgage at a 5% fixed rate and 25 year amortization, at the end of the two years you will owe $71,805 on your $75,000 mortgage. You have now built an additional $3,195 equity into the property ($75,000 – $71,805 = $3,195) using the rent money you collected to pay down the mortgage.

Your property may be worth less than you bought it for, but you’ve still made $7,995 from it in two years (from the positive monthly cash flow and the principal your renters have paid down).

And – remember – you only actually realize a gain or a loss in property value when you sell the home so you really haven’t LOST the 5% the property went down. If you haven’t sold it and you’re still making money each  month don’t worry about it!

Focus instead on the fact that you’ve made a 32% return ($7,995 divided by $25,000 invested) on your money after 2 years. And if you hold onto it, and ride the market cycle back up, when you do go to sell you’ll likely enjoy a nice lift in value to add to the other two ways you’ve made money on it.

On some of our properties we’re paying down as much as $1,000 per month on the mortgage using the rent money we’re collecting plus we make $500 to $1,200 per month in positive cash flow! Even if the value on those properties never changes we are making money each and every month through the cash flow and growing our wealth by $12,000 a year.

Plus, the big beautiful bonus of buy and hold investing is that you’ll have been enjoying some nice tax deductions along the way that can help offset income you’re making with this property and with other sources too!

I tried explaining this to some of our friends but they kept coming back to the question “What do you think house values will do in the near future?” so I eventually gave up and said my crystal ball is broken but they will eventually go up in most areas. Then I quickly changed the subject over to their jobs, kids and travels. It was easier … but for my fellow real estate investors remember that appreciation is just one way to make money with buy and hold real estate.

Sound Real Estate Investing Advice

Real estate prices are governed by a huge number of factors. Therefore, real estate investing advice is not like a sure shot prescription about how you should invest. Rather, it is a broad set of guidelines that will help form your own thumb-rules. The most important real estate investing advice is that investment in real estate should never be confused with speculation. Here are a few aspects that you might want to consider before you put your money into real estate.

Real estate investment is like any other investment. It is more like investing in Treasury Bonds or Mutual Funds. You get returns on it even when you continue to hold on to your investment. In property/real estate investing, the gain could be two-fold. If the property you hold is in a sought-after neighborhood, it would most likely fetch you a good rent. While you keep getting the rent, the prices could rise and give you the added return.

A typical property estate investor has the financial muscle and staying power. Such an investor does not get carried away by small, short term gains and instead concentrates on the big picture. An annual return of 6 to 8 percent of the invested amount is considered decent. Anything above 10 percent is a big bonus.

In the case of speculation, you enter when the price is low and exit at a higher price. The assumption is that prices will continue to rise, and that is not always the case. In fact, the last decade has seen a big slump of over 70 percent in many of the otherwise booming economies. The best bet in the case of speculation is being able to spot developing neighborhoods, especially residential, and to invest early.

In addition to the property estate investment and speculation discussed above, there is an interesting alternative. The real estate investor buys property that is not in the best of conditions, does it up in line with the current trends and then sells it for a substantially higher price. The unique selling point in this case is that the new buyer does not have to spend time, effort and money in getting it done. In one sense, this is an investment because you will still command a good rent till you get a buyer.

In the case of commercial property estate, the returns are naturally much higher. However, there are two points that need to be considered. Number one, the investment required is huge, depending of course on the size of the property and its location. The other important factor is that movement can be pretty slow. Do not expect businesses to relocate every other year. So, while the income in the form of rent is likely to be fairly high, the prospect of earning money through price appreciation can easily be years away.

In a nutshell, the best real estate investing advice is to look around, study the marketplace, and weigh the two channels of earning money - through rent and through price appreciation.

Join Forces with Our 7 Nationally Recognized Real Estate & Finance Experts to Wisely Navigate the Current Real Estate & Mortgage Markets to Earn Record Profits at RealEstateAdvicePros.com

Beach Real Estate - Tips for Making Money in the Sun

Real estate is a field of activity which many people decide to invest in, because if you know what to do and how to play your cards right, you could really make a lot of money and recover your investment in no time.

Investing in attractive beach properties can help you make an even greater profit, because everyone loves the beach and most people search for great beach residencies where they could enjoy their lives while standing on a beautiful beach, listening to the relaxing and soothing sound of the sea waves.

Having a place where you know you can go to any time you need to relax and unwind is a very nice thought, so by investing in real estate in places that are near the beach could be the greatest idea you've ever had.

California and Hawaii are two of the states where real estate investors have made big bucks by investing in beach properties, because their beaches are fabulous and people were willing (and still are) to pay top dollar for a real estate as near to the beach as possible, and dream of sitting on their lanais listening to the ocean waves crashing onto the beach.

California is also a very popular place for Hollywood productions, for this very reason: because Hollywood producers want to get the sweetest human dream closer to their viewers. California luxury residences and beach houses feature in many top movie productions, because Hollywood knows how to emphasize the American dream best and to make people watch their productions with interest.

That is why investing in beach real estate could be a really good idea for you. Every real estate investor knows that in order to succeed in the business, you need to consider the location thoroughly, because location is everything. And what better location could there be for someone looking for a home?

If you want to make an even greater investment, you could consider rental. If you purchase beach houses or apartment buildings near the beach, you could give them to rent and make a huge and constant profit for many years to come.

After all, not everyone can afford a house near the beach, but everyone wants to go on holiday, so this is a safe income that you can be sure of. However, you need to be careful at one aspect: the ravaging storms that sometimes occur in the beach areas.

Hawaii residents know very well that hurricanes coming from the ocean can come with devastating fury and demolish entire structures, leaving behind them a devastating view. Flooding is another possible problem a real estate investor has to consider, but if you know where to invest you can avoid all that hassle.

Local Retail Real Estate Market Ranks Among The Nation’s Best

With 2010 halfway over, San Diego County’s retail real estate market holds opportunities as well as pitfalls for potential investors, though experts say the region is faring better than most as shoppers keep their spending in check amid employment worries.

In its recently released second-quarter market report, the commercial brokerage and research firm Marcus & Millichap noted that high barriers to entry, especially in the county’s mature communities, will restrict retail construction and “stabilize property fundamentals” throughout much of the San Diego metro area this year.

Alvin Mansour, a senior vice president of investments and a director of Marcus & Millichap’s National Retail Group in San Diego, said by phone that the local region continues to rank among the “top five or 10” U.S. markets for the overall health of its retail climate.

That’s because retail generally was not overbuilt in most of the county’s prime markets in the run-up to the recession, partly because of limited space available for new projects.

“It’s tougher to get things built, and land isn’t that affordable in some places,” Mansour said.

An exception is the northern part of the county. Marcus & Millichap’s report said local retail real estate weakness has been “concentrated in overbuilt areas in the northern suburbs,” particularly Vista, Oceanside and Escondido.

“While fundamentals in those areas will likely remain soft in the coming quarters as new business formation lags, tight vacancy rates will persist in most core retail submarkets, limiting metrowide rent declines,” the report said.

Overall, it said, store closings have slowed down considerably from what was being seen through much of 2009, and Mansour noted that many, if not most, of the prime spaces vacated by national retailers have since been reoccupied.

More Space to Fill

After 260,000 square feet of retail space came on-line last year, the research firm projects that 420,000 square feet will be completed in 2010, increasing local stock by 0.4 percent. In the past 10 years, annual deliveries of new space averaged nearly 1 million square feet.

The new supply is expected to drive up the county’s overall retail vacancy rate by year’s end to 6.1 percent. The metro area’s vacancy rate was 5.7 percent at the end of the first quarter.

The report predicts that operators will decrease rents in 2010 to retain tenants. Asking rents are forecast to contract 1.4 percent to $27.21 per square foot, as effective rents — with negotiated discounts and incentives factored in — dip 2.4 percent to $23.84 per square foot.

Consumer spending nationwide is slowly recovering, but some retail property owners face distress in paying off loans tied to construction and acquisitions. That has sent real estate investment trusts and other private investors into the market shopping for bargains.

“Money has been sitting on the sidelines the past three years, and as an investor you’re not going to make money if it stays there,” said Pete Bethea, an executive director of Cushman & Wakefield Retail Advisors in San Diego.

Fewer Bargains

Bethea, who focuses on several Southwestern markets for the brokerage firm, said coastal retail markets are generally in better shape than inland communities. But that also means that places such as San Diego and Los Angeles have fewer bargain-priced properties available for purchase than others, including the Inland Empire, Phoenix and Las Vegas.

In the coming year, Bethea said, shopping centers likely will continue to trickle onto the market as lenders decide to sell off assets tied to distressed loans. That’s currently not happening with great frequency among San Diego County retail properties, though some center operators are facing a cash crunch because they’re not generating the rents they expected when the properties were being developed.

Some local centers depend on smaller businesses rather national tenants to fill spaces, and those smaller firms face financial challenges of their own, Bethea added.

Matt Romney, a senior vice president with San Diego-based Excel, aka Excel Trust Inc., said the retail-focused real estate investment trust is scouting long-term for potential acquisitions in San Diego County. For now, however, its portfolio remains concentrated outside of California.

Since its April initial public offering of stock, which raised $193 million, the REIT has purchased 15 properties spanning Southwest, Southeast, Northeast and Midwestern states. Romney said Excel will likely purchase more properties with the IPO proceeds, with other purchases likely later this year or in early 2011.

Romney said most of the company’s purchases have been off-market transactions, meaning they are not listed for sale. Leads on potential acquisitions come through contacts cultivated by the firm in the past 30 years, within the financial and retail communities.

Excel seeks out well-located centers, with good customer demographics and tenant mixes, and he said a mix of factors is motivating sellers in the current market.

“In some cases there’s distress and the owner is having issues with payments to their lender, but other times the owner might just be unsure about the future and wants to sell,” Romney said.

Waiting for Employment Boost

He noted that many center owners and buyers around the country are waiting for consistent employment gains, to help boost consumer spending and fuel a larger economic recovery.

Marcus & Millichap’s midyear optimism about the San Diego County market is fueled in part by moderate improvements in the local economy, with an expected increase of 1 percent in employer payrolls this year — an addition of around 12,500 workers.

Near term, its report said, buyer demand will remain strongest for single-tenant assets with national-credit tenants, priced between $1 million and $2 million. A “deeper, more competitive” investor pool persists for these properties.

Fewer buyers will pursue single-tenant assets priced above $2 million or those leased to regional or local tenants.

Investment strategies differ for multi-tenant assets, “where many buyers have sought to secure discounted properties with upside revenue potential ahead of a market recovery.” Those buyers are targeting assets with high vacancy rates or significant deferred maintenance, the report said.

Making Real Estate Money - Ben Stein: Real Estate Will Be Glorious Again - Daily News Article

LONG BEACH, CA-Real estate will return to its glory days, it's just a question of when. So said economist Ben Stein to nearly 3,000 building owners and managers at the Building Owners and Managers Association 2010 International Conference & the Every Building Trade Show. The lawyer, columnist, author, professor and humorist served as keynote session speaker Monday morning at the three-day event at the Long Beach Convention Center.

"The time will come when real estate is a glorious subject again rather than a dismal subject," Stein assured the audience. "It always comes back.”

Stein pointed out that building owners and managers fight struggles with banks, fight with difficulties such as trying to get a tenant, then trying to collect rent from that tenant, then trying to resolve complaints, lawsuits and other difficulties on a day-to-day basis. “You have every conceivable roadblock in your path. You face an uphill battle every day. But things will get better.”

Stein encouraged the BOMA attendees to take heart in how they have lasted despite the difficulty of the job. "You have lasted. You have persevered. And the fact that you have persevered, is in and of itself, a miracle,” he said.

When people go to Egypt, they want to see the pyramids. When people go to Rome, they want to see the Coliseum, Stein said. “It is the real estate, the shopping malls, and the buildings that carry over our culture from each decade to the next. It is these buildings that people will look back on and learn about 21st Century commerce and behavior.”

The challenge of being a building owner and manager is harder today than ever, Stein pointed out. In 1933 for example, “If you wanted to buy a building, no one cared about environmental leadership, or LEED ratings, or the right greenness,” he said. “Now, God forbid if there are any Indian artifacts near your site"

Stein pointed out that there is no such thing as a recession that goes along forever and ever. “All recessions end,” he said, “It is already happening even if it is not as fast as we would like.”

The bedrock of getting through the recession? The “watch words” according to Stein, are patience, frugality and trust. “Your career is not defined by one year or two years. There will be a few 2005s in everyone’s career. Money will still be snowing out of the sky once again someday, but it takes patience to get there.”

He continued: “You have to trust also that there are certain basics in life. Everyone needs space. You can sell or lease anything. Everything has a price,” he said. “Meet the market in price and everything will start flowing."

Stein added that the job of a building owner and managers is to be responsible to themselves. "You cannot count on the government or rating agencies or investment banks to bail you out,” he said, “you have to count on yourselves.”

Stein took a step back and looked back at his childhood, growing up in Silver Spring, MD to put “where we are now” into perspective. Back then, he said, “the world was segregated, Hitler was still in power in Germany, a woman being the head of a giant corporation was unheard of, and terrible, horrific events were happening.” Now, things have changed dramatically he said. “Where we are now is serious progress.”

He pointed out that “yes, this is a serious recession, but things have been worse.” But he said that if you look back, and think about the poverty that we used to have in the US, the conditions have changed dramatically for the better. “If you look at some of these old houses with the tiny closets, it is because people didn’t have rooms and rooms of clothing.” He also pointed out that there is a greatly more civilized discourse in Congress and that medicine has registered unbelievable progress.

In addition to Stein’s keynote, five educational tracks at the event offered more than 40 sessions over the three-day event and were presented by top industry experts. Tracks include: Achieving High Asset Value in a Down Market; Assessing Operational Efficiencies and Savings; Tackling Today’s Leadership Challenges; Equipping Building Engineers for Greater Operational Efficiency; and Going for Gold: Leadership and Lessons from California.

In a session, titled: “Do Green Buildings Perform,” panelists pointed out that the mere presence of a LEED certification, particularly LEED for new construction, does not necessarily ensure performance. “It isn’t enough,” said Brenna Walraven, managing director of national property management at USAA Real Estate Co., who is based in Irvine, CA. “It does not guarantee performance.”

Walraven said that LEED certification is about how the building is built, not how it operates, but that being a green building is really about how it operates. She added that the key to making any green building perform is first to focus on energy. “Don’t just think about a plaque on the wall. Think about how the building can become more efficient,” she said.

Craig Sheehy, president and CEO of Envision Realty Services LLC, who is based in Folsom, CA, explained that 10 years ago, he didn’t have a clue what a green building was, but now he is in the holy grail of property management. “It is amazing how far we have come. Everyone is focused on the green building movement. And you can build the greenest building in the world, but if we don’t have it operating green, what is the point?”