Why real estate investors should look around the world | Financial Post | Real Estate Investing

Why real estate investors should look around the world | Financial Post
Time Hacks For Part Time Real Estate Investing (Part 2)
Investors That Crave Dividends Should Buy RioCan Real Estate ...

Why real estate investors should look around the world | Financial Post

Posted: 14 Aug 2015 07:46 AM PDT

The U.S. has offered the best growth for global real estate investors in recent years, because extremely accommodative monetary policy has made financing extremely cheap.

The sector has also attracted a lot of capital flows as people started to put the money they kept in cash during the financial crisis to work.

But many didn't necessarily want to buy regular stocks, due to the uncertainties about when earnings and economic growth would arrive, and others feared fixed-income products because of the prospect of higher interest rates. Real estate, however, provided a nice middle ground and that has led to rising property values.

As a result, Timbercreek Asset Management portfolio manager Corrado Russo thinks the low-hanging fruit is gone from the U.S. market.

He expects cap rates — the ratio of net operating income to property asset value — will stay constant, with more upside coming from earnings growth.

Europe, however, appears to be where the U.S. was three or four years ago, and that's attracted Russo's interest for the closed-end Timbercreek Global Real Estate Fund (TGF.UN/TSX) and a recently launched mutual fund that has many of the same exposures, the Timbercreek Global Real Estate Income Fund.

"We've obviously seen a pretty significant decline in interest rates across the continent," he said. "Our view is this is driving cap rates lower and asset prices higher. We've already seen that start to happen and we think it is going to continue."

Russo noted that 10-year bond yields in Germany, the Netherlands and France are down between 140 and 180 basis points since the start of 2014, and many pension funds are branching out into real estate and looking for assets in Europe.

Combine the low cost of financing with the high demand for product, and he expects to see some pretty significant gains in property values.

Russo is playing the cap-rate compression trend in Europe several ways, including through names such as French retail-focused company Mercialys SA and more diversified players like Germany's TLG Immobilien AG.

However, he highlighted Dream Global REIT (DRG.UN/TSX), whose entire portfolio in Germany.

"Dream has done an incredibly job of repositioning its old Deutsche Post assets, and buying high-quality portfolios," Russo said. "We've seen a run-up in the stock as people have appreciated this, but I don't think the cap-rate compression has played its way into it."

Although U.S. private real estate values remain relatively high, publicly listed REITs have fallen more than 10 per cent on the year as sentiment fades on fears of U.S. Federal Reserve rate hikes.

Every time Janet Yellen says anything — deemed right, wrong or neutral for the market — REITs get hit. But, as Russo points out, if interest rates are going up for the right reasons, such as growth and inflation, then the environment is actually quite good for real estate.

"Growth means more demand for real estate, higher occupancy and more pricing power, so cash flows will rise," he said, noting REITs actually outperformed during seven of the past eight hiking cycles. "If inflation is higher, then the replacement cost of putting up a new piece of real estate goes up, and the existing piece of real estate becomes more valuable."

The recent selloff is also creating opportunities related to M&A, with the portfolio manager recently selling Home Properties Inc. after a private-equity firm bought it out.

One name he thinks may be a consolidator is Stag Industrial Inc. (STAG/NYSE), which owns 265 institutional-quality big-box, single-tenant industrial assets such as warehouses and distribution buildings.

Since its IPO in 2011, Stag has grown its portfolio by about 250 per cent and its dividend has risen 33 per cent.

"They are seeing a lot of opportunities to buy companies and other portfolios, and they have a very attractive cost of capital given where their stock is trading," Russo said.

Other themes the portfolio has exposure to include a recovery in Australian fundamentals with a position in high-quality regional mall operator Scentre Group Ltd. (SCG/ASX), as well as Singapore's growing role as a gateway into Asia through warehouse and logistics companies.

Russo is also playing the Chinese government's push to drive more foreign investment directly into the Shanghai stock market through connections with Hong Kong, with a position in Sunlight REIT (0435/HKG), whose property assets there make it an attractive opportunity.

Time Hacks For Part Time Real Estate Investing (Part 2)

Posted: 11 Aug 2015 02:00 PM PDT

Real estate investors have the luxury of choosing whether or not they want to work part time. It is perhaps one of the most attractive aspects of becoming an investor in the first place. The prospect of investing part time, while maintaining a nine-to-five status, is an appealing a way to break into the industry. It is both a way of testing the waters and providing yourself with a safety net to fall back on. However, investing part time requires discipline and a unique ability to maximize your efforts. If you are to be successful as a part-time investor, you must first learn how to work more efficiently with the time you are given.

Part one of our series on Time Hacks For Part Time Real Estate Investing taught you the importance of having the right team and plan. Part two will emphasize the following:

3. Optimize The Weekends

As a part-time real estate investor, there is a good chance you are fully committed to a subsequent full-time job. The typical nine-to-five will keep people occupied for the better part of the week, and allow very little – if any – free time. That said, the weekends are a part-time investor's best friend. The key, however, is to optimize the time you spend on your real estate business wisely. If the weekends are the only time you are permitted to invest in real estate, you had better make them count.

Of course, that is easier said than done. So what is the best way to maximize your efficiency on the weekend?

In optimizing the time you spend investing in real estate, the first thing you will want to do is prioritize your most important tasks. Be sure to identify the most important things you need to do. Only then will you know what demands your attention. Of particular concern, however, is the futility of a to-do list. While great in theory, a list of things to do can quickly become a deep rabbit hole. As an investor, it is entirely conceivable to generate a to-do list that will never be considered complete. There are only so many hours in a day. Stick with what needs to be done.

When you have an idea of what needs to be done, assign tasks to a schedule. Any activity or conversation that's important to your success should have a time assigned to it. If it helps, use an appointment book to keep track of times and when you want to accomplish a certain task. You will find that this little trick reduces the amount of time you spend on less-productive activities.

Ironically enough, it is just as important to set aside time to schedule your tasks as it is to preform them. Your first waking hours should be dedicated to scheduling out the rest of your day. Take 30 minutes to sit down with a cup of coffee and allocate your time accordingly. You will be surprised at the amount of downtime you eliminate by simply scheduling your highest priority tasks.

4. Prioritize Investment Strategies

The amount of time you spend investing in real estate can very easily determine the exit strategy you choose to pursue. In this case, however, it is no so much about maximizing your time, but rather choosing the investment strategy that fits in with your schedule. The amount of time you have available should actually influence the direction you choose to take.

There are several viable real estate exit strategies, but each requires a different amount of commitment, funding, knowledge and, most importantly, time. The difference in time it takes to complete a wholesale deal and a rehab is vastly different. Rehabbing a house can take months of extensive work and preparation, whereas a wholesale can take as little as 12 hours. Let the amount of time you have dictate the deals you pursue. The last thing you want to do is end up with a time sensitive project that you simply can't get to.

5. Networking

You have heard it a million times: the real estate industry is a people business. The connections you make as an investor are invaluable. Part-time investors are no exception. In fact, the importance of establishing a working rapport with like-minded individuals is magnified when time frames are limited. Networking with the right people is perhaps the best thing you can do for your part time business.

Finding leads is one of the most important things an investor can do. However, it is increasingly difficult for those with limited time on their hands. Generating leads requires a great deal of time, commitment and follow up: three luxuries that not every part-time investor has. Networking, on the other hand, makes it easier for part-time investors to cultivate leads. In fact, networking is one of the best ways to minimize the amount of time spent on finding viable deals.

It is entirely possible for part-time investors to bypass a lot of the nuances that have become synonymous with marketing if they invest their time wisely at networking events. In establishing relationships with the right people, you can minimize the amount of time spent acquiring deals – or even bypass it altogether. Sometimes all it takes to find the right deal is to talk to the right person. More often than not, networking events have these people.

Investors That Crave Dividends Should Buy RioCan Real Estate ...

Posted: 13 Aug 2015 06:32 AM PDT

There is a saying when it comes to investing in real estate: "The perfect day to start investing in real estate is yesterday, so that means today is when you should start." Because of tax laws, consistent cash flow, and the appreciation of assets when times are good, it makes sense why so many multi-millionaires got that way from buying real estate.

There are two prime ways that I can see to invest in real estate. The first is by actually acquiring properties and then renting them. The problem with this is that if you are new to the business, you might spend too much, deal with bad tenants, and lose money. While property managers are an option, they take a cut of the rent, so you are left with less cash flow.

The other option is to buy a stock like RioCan Real Estate Investment Trust (TSX:REI.UN). A REIT is a special company that gets to avoid paying income tax in exchange for kicking off the majority of its income in the shape of a dividend every year to investors. By acquiring shares of REITs you are effectively becoming a landlord without having to acquire any of your own properties. You leave the heavy lifting to RioCan and just take a cheque home.

There are some investors in Canada that believe RioCan is the best REIT that an investor could hold. And for the most part, I am inclined to agree with this statement. RioCan is in the shopping business. That means it owns millions of square feet in Canada and the United States that is dedicated to shopping centres. Since people are always going to want things, I doubt that these are going to disappear anytime soon.

But as we have seen with Warren Buffett's recent purchases, it's not just about great assets. RioCan has a wide moat because it can be difficult to build new shopping centres. There is only so much need, so if RioCan already dominates, a competitor is unlikely to come along to try to launch a competitive centre. This gives RioCan room to breathe and continue growing.

That growth, by the way, is coming in a very creative way. RioCan already owns the property that its buildings are on. Therefore, rather than trying to find new land, it is simply building up. It is experimenting by launching condominiums on top of its shopping centres. This is smart because the big costs of launching new properties are already gone. On top of that, the retailers leasing from RioCan are happy to have more people close by to buy goods.

All told, this has resulted in RioCan being able to pay a very lucrative dividend. Currently, the yield is 5.43%, which is insane. That $1.41 paid yearly will look good reinvested in more shares of the company, allowing you to generate even more cash flow from real estate you don't have to worry about. And if the condominium project works for the company, I expect the dividend to rise even more.

So if you want solid cash flow that isn't going to go away anytime soon, you should seriously consider buying shares of RioCan. It really could be the perfect real estate investment for you.

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Fool contributor Jacob Donnelly has no position in any stocks mentioned.

There are two prime ways that I can see to invest in real estate. The first is by actually acquiring properties and then renting them. The problem with this is that if you are new to the business,…

Real Estate Investing

Friday, 14 August 2015

Why real estate investors should look around the world | Financial Post | Real Estate Investing

Why <b>real estate investors</b> should look around the world | Financial Post | Real Estate Investing

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