Real Estate Investment Consulting

Yes. Since Realty Yield almost always begins any new client engagement with a comprehensive review and analysis of the client's current assets/holdings (real estate and other assets in all classes), we get a clear picture of your current position and future goals.  With this knowledge we compare market alternatives (including real estate, stocks, bonds, etc.) and likely projected investment returns to the current situation.  If the data and timing is right, Realty Yield will assist in executing a “strategic” change to improve returns and overall wealth accumulation

Sound and effective investing does not necessarily require a large time commitment by the investor.  However, it is imperative to consult with appropriate, trusted advisors in the areas of law, tax, and investment/wealth.  All investors can be successful, if they implement and follow some basic, time-proven principles.  

For example, effective cash flow management, in combination with the power of compounding, can lead to significant wealth generation, while maintaining low risk. These basic principles can be applied to all investment vehicles (stocks, bonds, real estate, etc.). When these basic principles are followed in conjunction with the appropriate use of financial leverage (primarily through real estate), investment returns and wealth accumulation can magnify.

There are many factors that will impact the optimal holding period. However, as a general guideline (assuming reasonable appreciation based on historical averages) most proactive owners of income-producing, investment real estate make some sort of “strategic” change every 3-6 years. This change may be either a cash-out refinance of an existing property(s) with the reinvestment of proceeds into a new property, or the sale of existing property(s) and the reinvestment of all net sale proceeds into a new property(s). Please note that a sale and reinvestment is typically completed through an IRC 1031 Exchange.

There are multiple different property types within the Commercial/Investment arena, including; apartments; office buildings; retail complexes; industrial properties; and restaurants and mixed-use facilities (combination of two or more types). All types have their pro’s and con’s, which can change over time, depending upon many factors and considerations. It is important to note that the investment appeal and demand of the various property types rarely run on the same cycle.

This is a more difficult question to answer than it was even 3 or 4 years ago. The fundamental issue and challenge is trying to generate positive, or at the very least, breakeven cash flow. Even with a $50,000 to $100,000 down payment, many small residential rental properties (rental homes and small multiplexes) will not generate positive cash flow after the loan payment, taxes, insurance, maintenance and other expenses are paid. Current market rents are just not high enough to offset the run-up in property values (hence purchase prices) over the last few years. We recommend completing a pre-purchase financial analysis before any acquisition is made. Unfortunately, property types with higher returns (apartments, office buildings, retail properties and other commercial property types) will almost always require capital-equity of at least $200,000+. In these cases, partnering with another small investor is a viable option to consider.

YES - If your goal is continued growth of equity-capital (increased wealth). Assuming the continued long-term appreciation of real estate (even at a modest appreciation rate), the greater the total asset value of holdings, the greater the potential for growth (regardless of property type). However, we recommend completing a financial analysis, in order to fully understand how increased financial leverage will impact cash flow, as a high level of financial leverage can potentially cripple cash flow on smaller properties (particularly rental homes and small multiplexes).

If the combined equity-capital in these smaller properties is approximately $250,000 (or greater) the answer is simple… A larger property will almost certainly give you better returns, and is therefore a better investment.  The lone exception would be for small properties that have some type of “added value” opportunity that has not yet been pursued, i.e. new development, change of use, etc.  Aside from special cases like this, changes in the market over the last few years clearly suggest that, for those with enough equity-capital, there are much better alternatives.

Realty Yield has easy to understand proprietary investment analysis tools and reports that will look at pre-tax cash flow, income tax burden, loan/debt impact, and appreciation considerations.  We will then compare what you currently own with what is currently available in the marketplace and help you find the investment with the best return.  

The answer is almost always NO, if the fundamental long-term goal is to maximize investment returns and wealth accumulation.  After all, one of the primary appeals of real estate is the ability to use financial leverage (borrowing money to make more money). This unique and powerful wealth building opportunity, with the asset class of real estate, is widely misunderstood by many private investors, and simply isn't taken advantage of. It is important, however to understand that the proper degree of financial leverage to be utilized depends  on numerous market factors, as well as the risk tolerance and goals of each individual investor. One of the primary issues we will determine is whether the current market borrowing costs (interest rates) and property capitalization rates indicate a positive, negative or neutral leverage environment.

The answer depends on many factors, including property type(s) currently owned, projected future returns of existing property(s) factoring appreciation, value-added opportunities, etc. In order to accurately calculate and compare both strategies, a complete financial analysis is required. The Realty Yield can assist in clearly answering this question.

YES.  For one thing, the Seller is almost always responsible for paying both the Listing and Selling Broker.  However, the primary reasons have nothing to do with who pays commissions, or the idea of possibly getting a better deal.
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For example, a competent and experienced Buyer’s Agent will assist in finding, screening and analyzing the financial/investment viability of a given property. As experienced Commercial/Investment Real Estate Brokers are “in the market” daily and have a pulse on values,  market buy/sell trends, and other pertinent market/property data, they will be able to negotiate the best deal possible. Additionally, many Sellers will interpret offers from respected members of the Real Estate Brokerage community as more viable, due to higher closing ratios than deals entered into by private investors without representation. Finally, a Buyer’s Agent will do most of the work and will save the investor countless hours of time.

Returns in any asset class can, and likely will, be both variable and even volatile at times. Fortunately returns in real estate can usually be more accurately projected and controlled than investments in other asset classes. However, please note that ALL INVESTMENTS HAVE INHERENT RISKS!

As of the summer of 2007 (and indicative of the market over at least the last 10+ years) most private real estate investors (when properly invested) have realized average annual returns of 15% to 25% annually on investment/commercial grade, income producing real estate investments. This includes apartments, office buildings, retail buildings and other similar properties. The average annual returns (absent of appreciation – THE SUBJECTIVE FACTOR) have averaged in the 6% to 12% range, when only factoring pre-tax cash flow, income tax burden/credit, and the additional yield from the principal pay down on the debt/loan (if any). Financial leverage will have a significant impact on returns (whether factoring or not factoring appreciation).

DISCLAIMER- the above investment rates of return are based on both market averages and actual returns from current clients. It is advised that any investor contemplating similar investments and expecting similar returns fully discuss plans with Realty Yield or other qualified advisors before acquiring any real property.

Yes. Even though Realty Yield specializes in the asset class of investment real estate, we take a “big picture” approach to wealth management and the allocation of equity-capital.  After all, improving and optimizing cash flow is often a prerequisite to successful long-term investing and wealth accumulation.  We clearly understand that too narrow of a focus can result in improper asset allocation and unnecessary risk. Realty Yield has considerable experience and expertise in Cash-Flow Management Strategies for both individuals and small business owners.

Simply put, Realty Yield assists individuals in maximizing investment returns on invested capital-equity. We have the expertise and experience to not only advise on real estate investments, but to advise on an overall Comprehensive Wealth Management program, as well.

Yes. In fact, this move can be to your benefit.  However, executing a simultaneous, multiple disposition exchange is more complex and requires an additional level of planning. There are several timing and deal specific structuring issues, which become absolutely critical. Realty Yield has considerable expertise and experience with assisting clients with this type of IRC 1031 Exchange.

A 1031 Exchange is a technique used by real estate investors, that allows for an investment property to be sold, whereby the capital gain will not be taxable at the time of closing. In fact, if the deal is handled properly, any tax on the gain can be postponed indefinitely.  This kind of transaction has the mistaken name of “the tax-fee exchange”.  However, this "tax-free exchange" is only true under certain circumstances, and with proper planning.  
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Anytime, an investor/owner of an investment property wants to sell and reinvest equity-capital into another investment property the IRC 1031 Exchange applies. It is recommended that planning for, and executing, an IRC 1031 Exchange be completed under the guidance of a competent advisor. Realty Yield has considerable expertise and experience assisting investors/clients through this process.

In almost all instances NO. Most direct lenders will work with Commercial Mortgage Bankers/Brokers without charging an origination fee. Typically the Mortgage Banker/Broker will charge a “brokerage” fee, which is about equal to the “origination fee” a direct lender would charge a retail borrower. Therefore, the net pricing difference to the borrower (in most cases) is a non-factor. However, all the other advantages of utilizing an experienced Commercial Mortgage Banker/Broker are still available to the borrower.

If you are working with a Commercial Mortgage Broker/Banker, who has experience and expertise with BOTH Advising/Strategizing and Loan Packaging/Placement, the benefits of working with a Broker/Banker should be significant.  Commercial Mortgage Brokers/Bankers, who have an understanding of lender underwriting criteria, (particularly property income/expense issues and debtservice-coverage limitations), can often secure greater loan amounts, because they can make proper “packaging” and “placement” decisions.  Furthermore, while there are a multitude of differences, (not only between lenders, but also with the various programs offered by any given lender), a Commercial Mortgage Banker/Broker specializing in Commercial/Investment Properties can provide objective and unbiased assistance, with all critical elements of the mortgage strategy and application process.

In today’s market the final funded loan amount is often the most challenging issue to deal with and overcome. It is far and away the number one reason why real estate sell/buy transactions fail.  Furthermore, beyond the interest rate and loan term, other critical decision items and issues need to be addressed, such as loan type, prepayment penalties and final approved loan amount. In this regard, it is imperative to understand that debt/financing is a “tool”, to be used to increase returns.  It should NOT be handled as an afterthought, in the real estate acquisition or refinance process.

The proper answer to this question almost always involves issues that extend well beyond just Capital Gains. It is strongly recommended that all your trusted advisors (legal, tax, estate, real estate, wealth) be consulted prior to executing any sort of “Exit Strategy”. Strategic mistakes can almost never be undone and can cost investors a significant portion of their wealth, which took a lifetime to accumulate.

When it comes to real estate dispositions, one of the most valuable and straightforward strategies often missed by sellers is the simple use of owner financing (first and second notes and trust deeds). This allows sellers to receive equity-capital proceeds in multiple tax years, and as needs require. In this case, capital gains taxes are not due/recognized until the year of receipt of monies.