Fund Hot News

Private real estate investment trusts are becoming an increasingly popular investment tool in Canada. But with so many choices out there, how can you tell which one to choose?

Here are ten questions to ask:

10. Do they know real estate?

Before deciding to invest with a private REIT, try to determine if the trust owns and manages a wide range of income producing and development properties diversified across retail, residential and office spaces.

9. Do they own and manage diverse assets?

While we typically think a REIT should diversify among different kinds of spaces – retail, residential and office as mentioned above – a good real estate investment trust should also manage properties in different geographic locations, not just in Canada, but also ideally in the United States. Continue reading ‘Real Estate Investment Trust: Assessing a Syndicate Manager’ »

Many people have questions about the benefits of institutional asset management in the context of real estate investment trusts (REIT).

Here are some benefits to choosing a management solution provided by REITs:

Regulated transparency
REITs are overseen by extremely strict regulations, and must comply with reporting standards in across international jurisdictions.

Shields from liability
Many landlords or other direct owners of real estate are hindered by personal liability when leasing out a property. These liabilities are legal, as well as financial. The REIT structure avoids this. Continue reading ‘Institutional Asset Management Provides A Variety of Benefits’ »

One of the most misunderstood, but important, terms in real estate investing is the Capitalization Rate or cap rate for short. This key metric is at the heart of all income property investments and allows investors to compare multiple properties to one another by taking into account their expense load. Unlike the GRM which only accounts for a property’s Purchase Price and Gross Scheduled Income (GSI), the CAP Rate also accounts for a property’s expenses, with consideration for operational efficiencies or mismanagement as the case may be.

CAP Rates are basically the savings rate or yield of a real estate investment in which you pay all cash. For example, a 10% CAP property would yield a 10% cash-on-cash return if you purchased it with cash and no debt. You calculate a property’s CAP rate by simply dividing the Purchase Price by the Net Operating Income (NOI).

When calculating a CAP rate, it’s important to properly account for expenses. Since your NOI is calculated by subtracting your expenses from your GSI, understating expenses will overstate your NOI and thus your CAP rate, making the investment appear better than it truly is. The key is to make sure that you verify as many actual expenses as possible (taxes, utilities, management, etc.) and predict others as realistically as possible (maintenance, reserves, etc.). Your goal should be to arrive at a realistic CAP rate for the investment during your Due Diligence period so you can determine whether or not to move forward with the purchase.

Continue reading ‘Real Estate Investment Training – Understanding CAP Rates’ »