Everything you need to know about REIT

What are REITs?
What are REITs? REIT is an acronym for Real Estate Investment Trust (REIT), which can be defined as a company that owns and operates real estate that is income producing, as well as owning assets relating to real estate. In 1960, Congress established REITs to allow investors and individuals the ability to invest in wide-ranging and large-scale income producing properties. REITs differ from other real estate investment types because REITs are required to develop and acquire investment properties with the purpose of operating them as part of an owned investment portfolio, whereas typical real estate investors resell properties after they have been developed or renovated, and/or after holding an investment for a profitable period. Income producing properties own and operated by REITs include a range of property types, such as apartments, shopping malls, hotels, manufacturing warehouses, office buildings, in addition to mortgages and mortgage-backed securities. Majority of REITs prefer to specialize in a specific property type, for instance, retail properties. There are multifamily REITs, office REITs, Retail, and REITs that specialize in healthcare facilities, in addition to others. REITs provide a way in which individual investors can reap the benefit of earning a portion of income produced through the ownership of commercial properties, without having to go through the process of purchasing one.

Types of REITs

REITS can be categorized as mortgage, equity, or hybrid. Most REITs are equity REITs, which normally operate and own income producing properties. Conversely, mortgage REITs provide real estate owners and managers with money directly as loans or mortgages, or indirectly as the purchase of mortgage-backed securities. Mortgage REITs on average, rely on more leverage than equity REITs, as they rely more on borrowed capital. In addition, mortgage REITs typically manage their own credit risks and interest rates through derivatives and other types of “hedging” techniques. Hybrid REITs are companies that utilize a mixture of investment type strategies from mortgage and equity REITs.

Public REITs, whether mortgage, equity, or hybrid are registered with the U.S. Securities and Exchange Commission (SEC) and are traded publicly on the stock exchange. REITs that are registered with the SEC but are not publicly traded are called non-traded REITs or non-exchange traded REITs.

Publicly Traded REITs

Publicly traded REITs differ from non-listed REITs in several ways. Publicly traded REITs are also referred to as listed REITs and are more liquid because REIT shares are traded and listed publicly on popular stock exchanges. Brokerage commissions are also the same as for other public traded stocks, and rules governing stock exchange require directors to be separate from management. In addition, Nasdaq and NYSE rules require independent nominating, compensation committees, and fully independent audit. In addition, the minimum investment amount for a listed REIT is one share and market prices are publicly available in real-time, as well as a range of analytic reports. Public REITs are also managed by company employees, and specific exchange rules are in a corporate governance.

Public Non-Traded REITs

A public non traded REIT files with the SEC, but their shares are not publicly traded on stock exchanges and are also referred to as non listed REITs. This causes shares to be more illiquid and share redemption programs do differ with respect to the company and are very limited on average. Individual investors typically must wait a number of years (typically 10) to receive a return on their investment until the company chooses to engage in a public transaction, such as listing shares on a stock exchange or liquidating company assets. Public non traded REITs broker commission differs as well. Fees are a typical 9% to 10% of the investment, as well as other upfront costs, management fees, and back-end fees may also be charged. Public non traded REITs also typically have no employees, a third party manages the company, and corporate governance is subject to North American Securities Administrators Association (NASAA) guidelines and state guidelines. In addition, many states have adopted NASAA guidelines and require majority directors to be separate from management. Public non-traded REIT share values are not transparent. Independent information concerning share values is typically not available. Although, companies may provide share values one and a half years after an offer has transpired.

Non traded REITs performance has been under scrutiny over recent years due to its illiquid nature, lack of valuations, and governance issues. According to the Gilbert, Ariz., a research company that tracts non-traded REITs, asserts that 2017 marks the lowest capital-raising activity over the last 14 years. According to Commercial Real Estate Direct, non traded REITs performance was up 11.3% during the fourth quarter, from the third quarter of 2017, bringing capital rising for 2017 to $3.9 billion, per the “Summit Investment Research” company. In contrast to 2016, in which non traded REITs raised $4.8 billion, approximately 23% more than 2017 figures.

Private REITs

Private REITs, also known as a private-placement REIT are non-traded and non listed REITs that are typically associated with strong risks. Private REIT requirements differ from other REITs because they are exempt from registration according to the Securities Act and are not subject to the same disclosure and requirements that non-traded REITs are subject to, making it very difficult for investors to get a sense of value or make an informed investment decision. Accredited investors and investors with an excess net of $1 million are generally the only groups that can buy private REITs, which makes them least popular. Private REIT requirements differ from listed REIT investments as they are less strenuous and unlike public REITs, such as venture capital funds and hedge funds, which do not necessarily have to give prescribed disclosures to accredited investors. The concept behind an accredited investor relies on the ability of a private REIT investor to bear any economic risk of investing in unregistered securities.

REIT Investment Caution

Like with any investment, with REIT investments one should take one’s own financial situation into account, consult a financial adviser, and do thorough research prior to making any type of investment. Public REITs’ quarterly and annual reports, offering prospectus, and disclosure filings are available for review at www.sec.gov. Public non-traded REIT investments that are listed on major stock exchanges can be purchased through a stockbroker, as with other publicly traded stocks. Non-traded shares can also be purchased from brokers, but brokers must have been engaged in the participation of the REIT offering. REIT exchange-traded fund and REIT mutual funds are also an option for investment. It is important that one understand the risks associated with different investment strategies prior to backing an investment in any type of REIT.

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Source: realtyevest

Everything you need to know about REIT

Everything you need to know about REO properties

Several investment opportunities exist, and one of them is buying REO properties. It is one avenue investors may want to consider, mainly because it has certain advantages for those who want to earn from real estate.
REO investing is entirely different from buying a property on the retail market. An investor needs to be patient and should be armed with the right information to achieve success in this venture.

What are REO Properties?

REO real estate term is not that difficult to understand. In its simplest form, REO or real estate owned property can be a residential or a commercial property repossessed by a mortgage lender or a bank. When someone asks, “What are REO properties?” to an investor, the answer is usually straightforward.

A property owner may fail to meet mortgage requirements or obligations, and this can lead to the lender initiating some foreclosure proceedings, which will help recoup the costs of the investment. Sometimes, the property will not sell during an auction, or in other cases, the lender is still the highest bidder. In such situations, the lender will assume ownership.

The property then becomes real estate owned (REO) and the mortgage company, or the bank will get ready to put it on the market and wait for a buyer.

Are REO Investments a Smart Option?

For many investors, REO investment is more attractive than a traditional property that is up for a resale. One of the reasons behind this is that lenders are highly motivated to get rid of the property, which means that investors have a huge chance of acquiring the property with favorable terms. They can negotiate some aspects of the sale, including the closing costs and the final purchase price.

Additionally, buying REO realty directly from the bank or the lender can be less of a hassle than purchasing other properties because it eliminates some problems that may arise. For instance, in a regular sale where a homeowner is involved, it can be an emotional procedure. Investors do not have to be concerned about sentiments linked to the property during the negotiations because they only need to deal with the bank or the lender.

Another advantage is that investors may pay less when they go for REO investing than when purchasing a seller-owned real estate. Often, these properties are below or at least priced at market value, which is indeed a great deal for the buyer.

How to Get REO Listings

For those wondering if finding REO properties is difficult, the good news is that it is quite easy nowadays. There are a handful of ways that investors can try if they would like to perform an REO property search. One of the first and probably the easiest is through searching online. Some websites offer built-in methods on how to get REO listings where interested individuals can use the search engine on a particular site to find the properties.

Many websites have an extensive database for both commercial and residential listings. Using a device and an Internet connection, it is quick to find these properties. Another option to perform an REO property search is to go and meet lenders directly.

Most large banks have a department solely dedicated to REO realty. To make sure that the banks have these properties, an investor can check the listings on the site of the bank first. If it is a smaller bank, contacting the local branch is one of the most straightforward methods to know if there are properties available for sale. It is also useful to talk to the person who oversees the sales process to understand how to buy REO directly from bank.

Often, the whole procedure can become stress-free with the help of a real estate agent. He or she will understand not only the REO real estate term but also the processes that go along with buying and handling the sale. The agent can provide guidance in REO investments, primarily if he or she specializes in this type of properties

Buying the Property

One of the best things about choosing to invest in an REO is that it is not a significant challenge to find a suitable property. Investors can go to REO properties corporation, and it is possible that they can locate what they are searching for. In short, finding REO properties is not a problem at all because the challenge lies in the negotiation process.

Whether the investor has decided to go for an REO properties corporation or a bank, there are a few things to be aware of, especially when negotiating the deal. First, the lenders have the right to set their own guidelines when it comes to the sale of the property. For example, the lender may ask the buyer to provide a large deposit, or he may stipulate that the deposit is non-refundable.

Another thing to know is that REO properties are normally sold “as is.” It means that the buyer is responsible for the expenses for upgrades or repairs. As for the appraisal and the inspection, these things are part of the purchase process, but they will not be carried out until the buyer makes an offer and the seller accepts it.

Therefore, it is wise to include a clause in the agreement that the seller should allow retraction if the inspection discovers that there are several issues with the structure. Otherwise, the investor will end up paying more than what he will get out of the transaction.

To formulate an offer, the buyer should understand the fair market value of the property, which can be used as a guideline. Most of the time, it is useful to get guidance when choosing to learn how to buy REO directly from bank.

The starting bid may be identical to the asking price, but this situation happens when there is intense competition for the property. On the other hand, if there are no interested buyers, a discount may be negotiated. However, investors should be careful of undercutting the offer too much.

Finally, financing should be considered. Buyers who do not plan to pay in cash will usually require pre-approval for the loan before they can make an offer. Unfortunately, if a property needs to undergo a substantial amount of work, obtaining the loan can be a bit more difficult than average – unless there is a large down payment offered.

Selling the Property

Some buyers choose to live in the REO property, while others see it merely as an investment opportunity. For investors who aim to make a profit through reselling, it is essential to make the property stand out to appeal to potential buyers. In such cases, the home may require some renovations on either the interior or the exterior, which means the buyer should be prepared for the costs involved.

An REO investment can come with risks and rewards just like with other types of properties. With the right knowledge and information, an investor can get huge returns with an REO property.

The post Everything you need to know about REO properties appeared first on RealtyeVest Crowdfunding News.

Source: realtyevest

Everything you need to know about REO properties

Crowdfunding vs. Hard Money Lending

We all know that real estate investing takes money. What you may not realize, however, is that there are many ways you can get the capital you need to buy that investment property you always wanted. These options include crowdfunding and hard money lending. Well explore both the benefits and drawbacks of both.

What is Crowdfunding?

Crowdfunding is a way to raise money by collecting large or small amounts of money from various people. These people may be family, friends, strangers, local private money lenders, customers or investors. The money is collected via a large pool of people on crowdfunding platforms (such as RealtyeVest) and social media. The private crowdfunding requires
no prototypes, intricate marketing plans or financial institutions to be involved on the part of the investor or sponsor. Instead, you are given a single platform to showcase a business idea or pitch for research. Therein lies it’s appeal and its differentiation from traditional ways of raising capital.

 

Benefits of Real Estate Crowdfunding 

  • You reach more potential investors: Depending on the platform used, thousands of investors are available to you. You can also access more than just local private lenders.
  • Validation of business concept: You present your business or concept to everyone and receive feedback as well as funds to validate your idea.
  • Streamline fundraising efforts: Instead of presenting your ideas to multiple investors at different times, you can have it streamlined which means it is accessible to every potential investor.
  • Market fundraising campaign: Crowdfunding allows you to promote the fact you are raising money for your potential investment through all social media channels.

Disadvantages of Crowdfunding 

  • Trouble finding funding: You have a great idea, but no one is rushing to give you money to support it. You may not receive any money for months or even one year. This can be frustrating and set real estate investment opportunity back.
  • Minimum requirement is a must for most crowdfunding: Many crowdfunding companies require a large minimum to participate on their platform.
  • Crowdfunding failure: If your crowdfunding campaign falls, it does not disappear from the platform. This means that future crowdfunding ventures may be harder to obtain because of past failures.
  • Crowdfunding is for large capital projects: Crowdfunding doesn’t discriminate, but the amount of money you want makes a difference. For smaller raises, the process could be futile.

What is a Hard Money Loan?

A hard money loan is a short-term loan secured by real estate. The loan is funded by one or more private investors, or hard money loan brokers, rather than conventional lenders like banks. These loans are for any type of property such as multi-family, single-family, and commercial property. Depending on the negotiated terms, the loan term could be two to five years. The loan does require monthly payments of interest. The monthly payment could include interest and principal with a one balloon payment at the end of the loan. The amount of the hard money loan depends on the value of the property. The property could property you already owe or the investment property you use as collateral.

 

Benefits of Hard Money Lending

  • Establish a relationship with a hard money broker: A hard money loan broker is more likely to establish a continued working relationship with you when you honor loan terms. This means you can make multiple hard money loans with one lender instead of loans with multiple registered private loan lenders.
  • Get your money quickly: You have fewer rules standing between you and your money. Hard money loan brokers are not as interested in the debt you have or your credit score. So, you can obtain the money you need to buy a property faster than working with a tradition bank.
  • Barrow a large amount of money: Banks require a five to 20 percent down payment on any loan they approve. Hard money lenders do not. Hard money lenders are willing to lend you about 100 percent of the property’s purchase price. This means you can borrow more money.
  • Hard money loans are good for first-time investors: Hard money loans aren’t for every investor or investment property. However, they’re often a great starting point. More than 100 hard money loans exist. If you are new to the investment business, a hard money loan will allow you to borrow more money and use less of your own money.

Disadvantages of Hard Money Loans

  • Interest rates are high: Hard money loans typically have an interest rate 10 to 20 percent. This is often higher than a traditional bank loan.
  • Short term loans: Bank loans for investment properties can span 15 to 30 years. However, a hard money loan terms are a couple of years.
  • Origination fees are higher: Hard money loans are considered a risky investment and investors are going to charge more for the loan. It could be as high as five percent of the total loan.
  • Loss of property: If you use the property as collateral and cannot make payments, you may end up losing the property in foreclosure. This means that property goes back to registered private loan lenders.
  • Not everyone does 100 percent hard money lending: You must do your homework regarding lenders. Some hard money lenders only work in hard money lending and no other types of loans, and they’ve had hard money broker training.  Whereas others do not.

Every investment option comes with both positive and negatives, and both crowdfunding and hard money lending are no exception. The investor willing to take a risk or the one starting out, may be more comfortable with a hard money loan. You receive the money first and must repay later. If you are the type of investor who does not want to pay a loan, crowdfunding is probably your best option because it revolves around securing investors that have private money to lend. Both funding opportunities are a great way to avoid the traditional real estate funding sources such as banks and credit unions. The best option to choose depends on your circumstances, current business needs and real state goals.

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Source: realtyevest

Crowdfunding vs. Hard Money Lending

How to Calculate Real Estate Returns

Often, those who aim to benefit from investing in real estate properties typically face navigating jargons and terminologies that may be unfamiliar to them. Among the most significant metrics and terms that investors need to understand involve the use of real estate yield calculation.

Return on investment or ROI is one of the most used terms in real estate investment. Agents today normally use various metrics that allow them to describe and promote their deals. It helps to understand how these methods differ so that the investor knows how to calculate real estate return on investment.

Three Real Estate Metrics of ROI Investors

The top three real estate expressions that investors may come across with include Internal Rate of Return (IRR), cash on cash yield, and cap rate.

1. IRR

Simply put, this metric is about the average annual return for a specific number of years. For instance, an investor can get the IRR by taking the net cash flow and using the appreciation calculator real estate expected within the period a property is held.

2. Cash on Cash Yield

With this metric, an investor can quickly learn what to expect on the annual return that he or she will receive before taxes – depending on the actual cash investment. Often, this metric is compared to cap rate since it considers the cost or the value of the property. Cash on cash calculation typically involves the cash investment and any debt on the property.

To know how to calculate cash on cash, here is an example: If an investor puts $300k to a deal and he receives payouts of $60k every year before taxes, the cash on cash calculation for this situation is 20%. When an investor learns how to calculate cash on cash, it should be noted that appreciation will not be included in the process. It could result in a much higher return on investment overall. It is also important not to include any ROI because this method of calculation is not about profit.

3. Cap Rate

When figuring cap rate or the capitalization rate, it frequently involves a commercial property. An investor may need a commercial property yield calculator to get the right numbers. Cap rate is also used on single-family home rentals. It offers a quick method of comparing investment opportunities, and a commercial property yield calculator can be used. In short, it is the yearly net income, and the best way to figuring cap rate is to divide the income by the value or the total cost of the property.

For instance, if a property is purchased for $1 million and produces an annual income of $110k will have a cap rate of 10%. The problem with this is that the property will have appreciated over time. The original purchase price of $200k for a real estate property that yields $100k will typically make the investor believe he or she receives 50% cap rate. The truth, however, is that the current cap rate is only 10% since the property is worth $1 million.

How to Know if the Investment is Efficient

The essential piece of information for real estate investors is the return on their investment. An appreciation calculator real estate, among others, can tell them how genuinely valuable and useful their investment properties have become. Some properties can help generate significant rental income, while others have low returns, which show that they are not good investments.

If an investor wants to know how the rental property is performing, he or she should know how to calculate real estate return on investment. There are different variables with various factors that mainly depend on the acquisition of the property. To know about real estate yield calculation, here are some methods that will allow the investor to determine how much he or she is earning:

1. Return on Investment

A real estate ROI calculator is often used as the standard for learning how much profit the investor has gained through the investment. In fact, the other methods of computing the returns are merely extensions of ROI. When you have a real estate return calculator, here is how you can get the return on investment:

ROI = (Yearly income from the rental property – Expenses and costs involved) / Total cost of the property

2. Cash Purchases

For investors who can buy a property in cash, using a real estate ROI calculator is not tricky, and it uses the same formula as above. Here is an example: A specific rental property has a value of $230K and the rental income every month is $850. The annual income for this particular property is $10,200. The missing amount now includes the costs and expenses, which can be a little confusing to obtain even with a real estate return calculator.

However, if you know the expenses involved, the process will be simplified. Some of the costs covered are property taxes, homeowner’s association fees, closing costs, vacancy costs, and renovation fees. The list can be exhaustive, but the majority of these expenditures are taxable. In this case, it reduces the financial burden on the investor.

Once you have the exact amount of expenses, you can start using the return on real estate investment calculator. For the mentioned example, if the final expenditure cost is $1k, the ROI will be computed this way:

ROI = ($10,200 – $1k) / $230k = 0.04 or 4%

An investor may now ask if a four percent ROI is good enough. The answer will depend on the property and the investor but in general at least 15% is considered favorable.

3. Out of Pocket

Some investors finance a certain property using a mortgage. Before using a return on real estate investment calculator, the investor should know about the method called out of pocket. It is quite popular since many investors buy a property with a mortgage. This tactic also results in better ROI because the property is not completely paid in cash.

The formula for this method is:

ROI = Yearly cash flow / Total amount of investment

Essentially, the yearly cash flow is the same as the rental income for the whole year minus the costs and expenses. With the formula above, the mortgage payment given every month is considered. The main difference lies in the total amount of investment. Typically, this calculation method ignores the price of the property. Instead, it takes the total amount of cash invested, which is the sum of purchasing costs including the down payment for the property.

In other words, the out-of-pocket expenses involve the total value of the currently owned investment property. The value obtained is much higher than the standard method’s ROI.

ROI is Not Profit

Before the ROIs become actual profits, the profits should be sold first. It is not unusual for a property to sell lower (or sometimes higher) than its market value. Often, the deal will be concluded at below the asking price of the property, so it reduces the final ROI calculation for that real estate.

It is crucial for investors to keep in mind that some costs are associated with selling the property, which may include the funds that will be used for landscaping, painting, and repairs. Additionally, advertising costs, along with the commission to the broker or the real estate agent and the appraisal costs should also be added to the total expenses.

The post How to Calculate Real Estate Returns appeared first on RealtyeVest Crowdfunding News.

Source: realtyevest

How to Calculate Real Estate Returns

Funds and Close $6.0 Million Equity Raise in 30 Days

JACKSONVILLE, Fla., April 9, 2018- RealtyeVest was engaged by Miami developer Tzadik Management to raise $6.0M in preferred equity for its 1,000-unit multifamily acquisition in the Atlanta market. “RealtyeVest immediately understood the intricacies of our underwriting and was invaluable in the development of the capital stack and subsequent negotiations” said Adam Hendry, CEO of Tzadik.

The assets are located in the communities of Albany, Warner Robins and Atlanta, GA. “Although we have a very successful crowdsourcing platform, many of our capital raising engagements are completed off our site as preemptive investment opportunities” said Dan Summers, CEO of RealtyeVest. “We have a very deep and diverse investor database. Many of which prefer larger stand-alone opportunities.” continued Summers.

As a result of this success, RealtyeVest, has been re-engaged to raise $15.0M for a 2400-unit portfolio currently owned by Tzadik Management. The portfolio was recently appraised at $165.0M, there is 108.0M in debt, $15.0M in preferred equity would bring the total leverage to 75% of the portfolio’s value.

RealtyeVest is a real estate crowdfunding marketplace that connects investors and sponsors (real estate owner-operators) with exclusive real estate investments. The company uses digital technology to disseminate and fund investment opportunities, with their platform allowing RealtyeVest members to browse, research and make informed investment decisions. With a diligent and forward-thinking team of underwriters, they focus on the most viable segments of the real estate market in order to minimize risk and maximize every investment opportunity.

If you would like more information, please call Dan Summers at 904-501-7693 or visit  https://www.realtyevest.com

The post Funds and Close $6.0 Million Equity Raise in 30 Days appeared first on RealtyeVest Crowdfunding News.

Source: realtyevest

Funds and Close .0 Million Equity Raise in 30 Days