February 25, 2020
Commercial real estate investors can make money in various ways. The two primary ways, however, are through collecting rents and properties increasing in value over time.
Today, we’ll go through both to see how real estate investing–Growth REIT investing in particular–can provide you with the means for long-term wealth creation. Plus, you will see why real estate investment takes time–but for the patient, long-term investor, the rewards can far outweigh the wait.
Whether you rent out a single room in your home, are a landlord renting out 20 units, or you’re an institution with hundreds of assets under management–collecting rents from your tenant(s) is where your money is coming from.
With the DiversyFund Growth REIT, all properties we purchase are ‘cash flow positive.’ This means that with every property, the rents collected are enough to cover operational costs, therefore making the property’s cash flow positive.
DiversyFund’s Growth REIT investors benefit from the cash flow of every property in the fund. Investors receive monthly dividends from rents collected on the properties. Dividends are automatically reinvested into the REIT on your behalf to purchase new assets and finance renovations. Reinvested dividends further benefit the investor through compound interest.
The next way real estate investors profit is from their property going up in value over time. This is appreciation.
At DiversyFund, we execute a value-add strategy on all of our multifamily properties. This means that as we’re collecting rents on the property, we are also making renovations to the properties. As units are renovated, rents are increasing and the property’s cash flow is rising.
Properties naturally appreciate over time, but this forced appreciation through renovation allows us to generate even greater returns for investors.
The majority of a property’s appreciation will take place in year 3, 4, or 5 of the investment term–after forced appreciation is completed and natural appreciation is taking place.
When properties in the fund have appreciated and are ready to be sold, investors will benefit from that profit at the end of the fund’s term. Profits from property sales are distributed to investors (principal and returns).
Real estate holdings are a great way to execute a long-term wealth creation strategy. DiversyFund investors observe a 5-year investment term. During this term, properties are being renovated, cash flows are rising, and natural appreciation is taking place. Therefore, it’s vital for investors to be patient, knowing everything that must take place before the disposition of a property.