Commercial Association of REALTORS® - CARNM New Mexico
The 10th Annual Market Update was held Wednesday, December 10th, 2014 at the Potawatomi Convention Center. This year’s event featured a variety of esteemed professionals in the Commercial Real Estate Industry. Read the Milwaukee Business Journal’s Review at: https://tinyurl.com/kczkkeu and check out photos from the event at https://tinyurl.com/lu7owlv!
For a copy of the slideshow, contact Tracy Johnson at (414) 271-2021 and she will connect you with the speaker.
I’ve read a lot of articles on real estate investment, but few seem to track a deal from beginning to end. I thought it would be interesting to see what has happened over the years. Mostly to look at how much a property appreciated. Cash flow from rent is a very important part of real estate investment.
Way back in June of 2002 a client needed to buy a property because he wanted to do a 1031 Tax deferred exchange to save on taxes. I found him 2407 Commercial NE as a replacement property where the seller, Pameco, would lease the property back from him for $4,528 a month. This worked out fine for everyone at a price of $486,000 and the buyer got a loan of $248,000. Unfortunately, Pameco did not mention they were nearly bankrupt and they moved out about a year later on a 10-year lease. About this time, the property was traded to his daughters for estate planning purposes. They took it over and needed to spend about $20,000 to get another tenant, Drive Train Industries, in December of 2004 and have stayed in the property ever since.
Here is where it begins to get interesting. The loan payments were about $1,900 per month so over the years the rents averaged about $4,300 a month, less than the original amount but still pretty good. That gives a cash flow of about $2,400 per month for 12 years or, $345,000. The loan was paid down to only $44,522 when they sold it. That means the tenant paid off this loan by $203,478. After all these years and low interest rates, Drive Train Industries decided after some prodding by me, to buy the property for $550,000, and with costs of sale the net is $504,373. This made them only about $18,373.
So most people only look at what we bought and sold, a property to determine if it made any money. In this case it looks like it was not very worthwhile, but take a look at what happened over the time of ownership and it tells a very different story. Over time the total money made was $566,851. The magic of cash flow and time is where much of the benefit of real estate’s power to create wealth really is–now that’s a good investment.
By: Richard Hanna, CCIM, Hanna Commercial, LLC (HomeStyle Magazine by Albuquerque Journal)
Click here to view source article.
Funds that restrict withdrawals but give investors access to assets they couldn’t otherwise buy could become more popular.
Most investors can’t buy farmland, like this in Illinois, but they are candidates for interval funds that invest in it. PHOTO: DANIEL ACKER/BLOOMBERG NEWS
Investors may soon be hearing more about interval funds.
With these funds, investors can redeem shares only at specified times or intervals.
Why would an investor want to own one? Because it’s hard for an individual to find another way to invest in the assets these funds hold.
Interval funds typically invest in illiquid assets that aren’t listed on any exchanges, including commercial property such as vast farmland or forestry tracts, as well as private equity and business loans. Few individual investors can afford to buy 10,000 acres of farmland, for instance.
The illiquidity is why these funds don’t offer shareholders the ability to redeem shares daily.
Some researchers think there will be both a need and a demand for exposure to such assets in the near future. Low returns from traditional investments by historical standards will lead to a “steady stream of assets moving into alternative investments,” says a 2016 report from consulting firm McKinsey & Co. “These flows will be redirected heavily toward illiquid private markets.”
Interval funds may also provide a boost for financial advisers in a world where passive investing in funds that track market indexes is the rage.
“What retail investors now hold is largely a portfolio of passive exchange-traded funds, so the alternative-assets domain is how the adviser will add value to the client,” says Kimberly Flynn, managing director of XA Investments LLC in Chicago.
By: Simon Constable (The Wall Street Journal)
Click here to view source article.
