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Investing in REITs - Passive Real Estate Investing

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Passive Income Strategies for your Financial Freedom INVESTING IN REITs www.slideshare.net/ ppis/
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Page 1: Investing in REITs - Passive Real Estate Investing

Passive Income Strategies for your Financial Freedom

INVESTING IN REITs

www.slideshare.net/ppis/

Page 2: Investing in REITs - Passive Real Estate Investing

DisclaimerThis is a presentation prepared for Education purposes only.

Neither Prosperis Passive Income Strategies (PPIS) nor any of its personnel are registered broker-dealers or investment advisors. We may mention that we consider certain securities or positions to be good candidates for the types of strategies we are discussing or illustrating. Because we consider the securities or positions appropriate to the discussion or for illustration purposes does not mean that we are telling you to trade these exact strategies or securities. Keep in mind that we are not providing you with any specific recommendations or personalized advice about your own trading activities. The information we are providing is not tailored to any particular individual. Any mention of a particular security is not a recommendation to buy, sell, or hold that or any other security, or a suggestion that it is suitable for any specific person. Keep in mind that all trading ALWAYS involves a risk of loss, even if we are discussing strategies that are intended to limit risk.

Also PPIS personnel are not subject to trading restrictions. Myself and any others at PPIS could have a position in a security or initiate a position in a security at any time.

Page 3: Investing in REITs - Passive Real Estate Investing

Real Estate as an Investment

• People like that real estate is a real asset.

• Generates a very predictable cash flow

• Rents tend to go up at about the same level as inflation

• Value of the real estate usually goes up over time

• Expenses are usually pretty predictable

Page 4: Investing in REITs - Passive Real Estate Investing

What are Real Estate Investment Trusts?

A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges like a stock.

Funds raised by a REIT are used to buy a pool of properties which are then leased out to produce rental income that is later distributed to investors as dividends.

REITs do not pay tax on the distributable income they pay to investors, but pay tax on the income they keep.

Page 5: Investing in REITs - Passive Real Estate Investing

Why REIT over owning rental property

The distributions from a REIT are taxed at a better rate than straight rent received from a rental property. 

Professional management at a great price because of economies of scale

REITs give retail investors access to areas of the market they normally wouldn’t be able to participate in, like commercial or industrial property.

A REIT may own hundreds of different properties spread across North America and even globally.

No down payment needed. Minimum required is based on your brokerage.

Author
http://www.fool.ca/2016/02/18/the-easy-way-to-create-a-real-estate-empire-and-never-fix-a-toilet-again/
Author
http://www.fool.ca/2015/08/27/how-to-easily-create-your-own-real-estate-empire/?source=c75yhocs0040001
Author
http://business.financialpost.com/news/fp-street/canadian-reits-go-global
Author
If a REIT distributes what it originally received as rental income, you will be taxed at your marginal tax rate as though you had received rental income. The composition of these distributions for tax purposes may change over time, thereby affecting your after-tax returns.REITs sometimes distribute amounts higher than what they can distribute, without compromising their production capacity and sustainability of distributions. In such cases, the surplus distribution may be considered a capital repayment. These are not usually taxable for investors, but reduce the basic price of the investor’s units for tax purposes. In other words, if you sell your units, you pay tax on the capital gain of any difference between the sales proceeds and the adjusted cost base at the time of sale. This is referred to as a deferred tax.To ensure that you benefit from the tax advantages of an investment in REIT units, make sure the REIT complies with the conditions applicable to specified investment flow-throughs (SIFTs). An investment broker can help you determine if the units are eligible.
Author
https://www.lautorite.qc.ca/en/reit.html
Page 6: Investing in REITs - Passive Real Estate Investing

Why owning rental property over REIT

• Leverage: It’s possible for an investor to purchase a rental for as little as 5% down. That kind of debt can lead to a succulent return on the original invested capital if done right.

• Control: As a property owner, you make decisions related to setting of prices, purchases and ongoing costs. You are more directly involved in decision-making.

• REITs are traded on the stock market. If the value of the underlying REITs falls significantly, you may be selling at a loss.

Page 7: Investing in REITs - Passive Real Estate Investing

Difference Between Investing and Trading

An investor takes a long-term, passive approach.

A trader takes a more active approach using various stock and options strategies that tend to capitalize on shorter-term market movement.

Page 8: Investing in REITs - Passive Real Estate Investing

The Decision

There are dozens of different REITs that trade on the TSX, and dozens more that trade on the U.S. markets.

Which ones should you choose for your portfolio?

Page 9: Investing in REITs - Passive Real Estate Investing

Factors to Consider

• Distribution levels

• Track record

• Diversification (Geography and Sector)

• Quality of assets

• Management

• Stock price fluctuation

Page 10: Investing in REITs - Passive Real Estate Investing

Profile of a REIT

• Trades on the TSX. Has fluctuated in price/unit from C$9.60 – C$11.80 in the last 5 years.

• Owns 100 hotels totaling over 7,000 guest rooms in the United States.

• It pays a monthly distribution $0.075 per unit, or $0.90 per unit annually, giving it an 8.4% yield annually. It has maintained this rate for 5 years.

Page 11: Investing in REITs - Passive Real Estate Investing

Profile of another REIT

• Trades on the TSX. Has fluctuated in price/share from $3.75 – $5.25 in the last 5 years.

• Owns 307 retail properties in eight Canadian provinces totalling 7 million square feet of leasable area.

• It pays a monthly distribution of $0.0208 per unit, or $0.25 per unit annually, giving its stock a 5.4% yield annually. It has raised its annual distribution for 12 consecutive years.

Page 12: Investing in REITs - Passive Real Estate Investing

How to hold REITs (The PPIS way)

In a self-directed account with an online brokerage

Can be held in an RRSP, TFSA or Open Account.

Page 13: Investing in REITs - Passive Real Estate Investing

$16.92

Page 14: Investing in REITs - Passive Real Estate Investing

$16.92

Page 15: Investing in REITs - Passive Real Estate Investing

How to invest in REITS –The PPIS REIT Investing Course

• Two hours

• Using the Questrade Trading Platform

• When to Enter a trade, When to Exit a Trade

• Basic Stock Chart AnalysisHow to identify trends (Moving Averages)How to define a trend (Fibonacci Retracement)Trend reversal predictions (Japanese Candlesticks)

• Transferable skills to ETF and stock investing.

Page 16: Investing in REITs - Passive Real Estate Investing
Page 17: Investing in REITs - Passive Real Estate Investing

Course offered on November 8, 2016

• $100

BONUSES

• Bring another person for half-price

• Combine with November 22, 2016 at Special Rate

• 10% off full price by registering TODAY

$50 (2016 FRIENDS AND FAMILY RATE)


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