We've had some investors pose this question to us recently: 'How much do I need to invest in an UPREIT to get started with REIT investing?' The answer depends on the kind of returns you want to actualize as a property investor. This will also impact the types of REITs you may choose to invest in.
- If you're an investor looking for maximum total returns and an elite investing experience, then you're going to want to begin (or complete) your investment portfolio with private REITs.
- If you're an investor looking to 'test the waters' when you invest in Real Estate Investment Trusts, and you're comfortable with weak returns based on your status as an investor, then you may consider publicly-traded REITs.
If you're comfortable with returns that may be even lower than what you could coax out of your own investment portfolio (we're talking anywhere between 1-5%), then an equity REIT will allow you to invest for relatively little.
These types of REITs (particularly publicly-traded equity REITs) operate off of purchasing shares and are open to investors of all skill levels—which increases the risk—and is partly to blame for their low returns. On the upside, you can get started for as little as the cost of a single share, even if your quarterly yield only ends up being $0.98.
However, if you're seeking an investing alternative as an accredited investor, then private REIT investing is your ticket to considerable dividend yields.
Designed for Accredited Investors Only
You may already be part of this exclusive bracket of investors, as defined by the SEC. Accredited investors are allowed to take part in private capital markets, which essentially means they have access to more investment opportunities than their peers under Rule 501 of Regulation D of the Securities Act of 1933.
There is no board that determines this investing status. When you decide to work with a private UPREIT, such as the Peak Housing REIT, your status is evaluated under the diligence of the UPREIT structure operators (the Umbrella Partnership). Traditionally, an accredited investor had these hallmarks:
- A natural person whose income exceeded $200,000 or more over the past two years, or $300,000 with a spouse
- A natural person whose individual net worth (or joint net worth, with a spouse) exceeds $1 million excluding their primary residence at the time of purchase.
If you're saddled with an underwater mortgage or have tapped into a home equity line of credit, these can both impact your net worth and cause it to sink below the threshold for accredited investors.
The original intent of these definitions was to shelter private investors from increased risk based solely on assets held. However, the SEC recently made updates to their terms for what qualifies an investor as 'accredited' that opens up a world of private investing opportunity to many new investors.
Under the new definition, you qualify if:
- You are a Limited Liability Company (LLC) with assets of $5 million or more
- You are a 'knowledgeable employee' of a private fund you wish to invest in
- You display established, clear measures of demonstrable financial sophistication.
Elite Investments Yield Elite Returns
Getting back to the earlier question we touched on about how much one might need to invest to really take advantage of what an UPREIT structure can offer, we set our minimum threshold for the Peak Housing REIT at $25,000. However, our typical investments are between $25,000 and $100,000.
Within this range, our investors are tapping into projected dividend yields of 6-9%, with distributions set to begin at the end of Q3 this year. Our distributions are also quarterly, but we're providing serious returns for investors for less than it costs to purchase an investment property outright—with none of the work. That's the beauty of private REITs and REIT investing in general: investors see more returns with less of the hands-on labor.
Instead of trying to wrangle a property with real estate companies that don't understand the unique needs of investors, why not skip straight to the profit? It will certainly be easier on you than trying to negotiate rent collection with a hostile renter.
Let Us Save Your Hairline
Frankly, we don't think traditional investing is worth the toll it takes on an investor's life and health when there are better alternatives available to you. At The Peak Group, we've dedicated ourselves to offering a better investing experience through the many benefits of an UPREIT structure.
If you're interested in joining the ranks of investors who have chosen to take their financial freedom, time, and life back from real estate investing, we're ready to provide you with all the information you need to make your move.
Get in touch with us to learn more about how the Peak Housing REIT is outperforming the competition in the residential sector—and how you can tap into these kinds of returns for your own goals.
Posted by The Peak Group on October 29, 2020