unlisted reits

[mathjak107]

im a little confused about how these unlisted reits work...i see you buy at 10 bucks a share and you get say 8% a year dividend and then when you sell assuming you can sell you get 10 bucks a share or so they say...the question is how do you benefit from property appreciation?...... if they sell a building how do you see your profits? is it a big dividend increase? anyone have any expieriance with these?

 

[d]

i've read only that they are not very transparent, and that's enough reason for me to stay away. a second reason being that it's not at all clear what your $10 is buying ... guess that's transparency too. perhaps someone more informed can better educate us.

 

[Ed_The_Gypsy]

If it sounds too good to be true, it is.

 

[saluki9]

It really depends on who is running the show. The problem is that many are broker sold and the broker plus dealer comp can eat up 10-15% of your investment at first.

That being said they do give you your $10/share back at the end of their horizon + any capital gains (minus their cut)


My FIL has invested heavily in these and done very well. Most either go public or sell their properties at the end and distribute the proceeds.

tread very carefully.

 

[mathjak107]

i have a meeting tomorrow with david lerner who sells the apple hospitality reits.....i spoke to a few people who own them and they are very satisfied...ill keep ya all posted as i have a ton of questions for them

 

[vmaxie]

How did the meeting with Lerner go?

 

[mathjak107]

very interesting meeting..bottom line we are going to make a small investment...
they have been working like this:
this is the 7th reit in the series ... apple hospitality reit now called apple 7started 2 months ago .they want to raise 1 billion in this offering by years end..all the others are closed once they reached the level of money they want and no new investors can come in
i spoke to owners of apple 2 and 5 and they are very happy...
you get a dividend of 8% a year and buy in at 11 bucks a share....the reits have a 6-7 year time frame at which time they are liquidated  if the market is favorable and the money split.they can choose to wait to sell if the markets arent right .you get your 11 bucks a share back plus any add'l profits...
the nice thing about the dividends is they are 87% taxed as income and 13% a depreciation return of capital so the taxes are deferred and reduce your cost basis later on so they are taxed as capital gains at hopefully 15% instead of at full income tax level...

you can sell at anytime after the first year with a small penalty and no penalty after 3 years.your shares merely are thrown in the pool of shares that are offered when others have their dividends reinvested and you get your 11 a share back....

its very conservative,id consider it a bond almost with a little sweetner at the end.they buy extended stay hotels and turn them over to marriot and hilton to run...they have been very successful doing this...
apple 6 just got a dividend increase to 8-1/4
    sales charge is 8% although you get your dividend on the full amount not the amount less 8%...so i figure if i can get 8% or better even at 7% after subtracting the sales commission its a good return....id invest more than i am if they had a previous sale but since the first reit apple 2 is being liquidated now i have no idea what the sweetner is at this point. these things are not transparent at all so your really not sure what your share of profits is like a stock

 

[Arif]

Mathjak,
This sound very similar to an investment that my investment group got into last year. We invested in a unlisted REIT call Redbrick which buys homes and rents them out. They only use 30-40% leverage and self manages the homes. You have to be accredited to invest in it though. Is there a similar requirement with the REIT you're investing in? So far we've done pretty good, about 8% return with funds locked in for 7 years till the investment is sold off. IIRC the one we got into was their 3rd or 4th offering and all the previous ones did very well.

 

[mathjak107]

no leverage here,all property is bought for cash..only investments they make are extended stay hotels that they own and fly the hilton or marriot flag and is managed by them