Real estate is one of the most time-tested ways to build wealth. (In fact, our very own Philip Michael wrote a book about it.)
But how do you actually get involved?
Plenty of ways, actually. (In fact, here are five ways you can own real estate without ever buying a property yourself.)
Here are three ways you can own real estate, as told by Philip.
How Do Interest Rates Impact REITs?
The last few months have been choppy for stock markets. The S&P 500 [SPY] index which is an indicator of the overall market has experienced at least three sharp declines since October this year.
With the tariff war looming large and interest rates set to rise again, are the stock markets still a viable investment option? Should you diversify and invest in REITs instead? Here we look at the relationship between rising interest rates and their impact on REITs or real estate investment trusts.
REITs are high-yield financial instruments that are obligated to pay at least 90% of taxable profits to shareholders. The maximum amount of returns are driven majorly by dividend payouts instead of price appreciation.
Rising interest rates
Generally, a rise in interest rates is driven by economic growth. There are several reports that suggest REITs outperform the S&P 500 in periods of rising interest rates. The response to an interest rate hike is the depreciation in asset value.
This is because investors think that higher interest rates reduce the present value of future cash flow from investments. However, contrary to public opinion, a period of higher interest rate has resulted in an increase in REIT share prices.
The leverage ratio is a key metric
Currently, the leverage ratio for REITs is at the lowest point in the last 20 years. The ratio of debt-to-book assets fell 95 basis points last year. This fall in leverage will lead to lower interest expense for REITs.
The interest expense for REITs was far lower at 22% last year compared to the high of 38% witnessed during the financial crisis of 2008. Another reason why rising interest rates will not impact REITs is that almost all debt is allocated at a fixed rate. The average maturity for REIT debt is around 75 months.
According to Brian Cordes, a senior vice president at Cohen & Steers, an investment company focused on real estate, “If interest rates are going up because the economy is improving, that can be positive for REITs because landlords can raise rents to cover the rate increases.”
You can sell off your REIT holdings in times of economic uncertainties or an economic downturn when the interest rates rise. But hold on to them if the economy is strong and investors will be rewarded.
Moving Out? Smart (And Eco-Friendly) Ways To Save Money
You may not live in the greenest city in America, but you have done your part to help the environment.
Maybe you’ve installed smart thermostats, LED lighting, and explained to your tenants how they could save money with smart eco-friendly apps.
You managed to get a recycling dumpster placed in the apartment parking lot. Also, you talked to your neighbors about how they could save energy by keeping windows covered during the heat of the day and by turning the thermostat up in the short summer and down during the longer winter.
Now you have transformed your rental property while helping others do the same.
There are a lot of eco-friendly places to model your rentals after, such as Denver, CO where rent prices are on the rise. Regardless of where you decide to invest, you can focus on keeping the environment clean.
But, now it’s time for YOU to move, either for a new job or just to a new home.
The last thing you want to do is keep everything green at your buildings, then leave a giant carbon footprint anyhow. As you load up all of your stuff on a big truck and move it to your new location, consider doing it in the most eco-friendly fashion..
You want to stay green and eco-friendly, but how can accomplish that during your upcoming move?
Here are some tips:
1. Save The Kitchen Until the End
You of course will need to pack up all of your kitchen supplies, but if you tackle the kitchen first and pack up all of your utensils and plates, you’ll find yourself relying upon plastic and paper disposables.
The lack of a functioning kitchen may also cause to drive to a fast-food restaurant more often and consequently use more environmentally unfriendly throw-away packaging. Save your kitchen packing to the night before you move.
Yes, cardboard is recyclable, but will your movers actually recycle it properly?
To avoid adding waste, save boxes throughout the year and use them to pack your stuff. That way, you have at least reused used a resource that you already possess, and you won’t have to purchase anything new.
Along the same line, use containers you already have for packing, like suitcases, plastic bins and gym bags. Anything that holds something can be used as a place to pack items.
If you do need to purchase boxes, find used ones or green boxes. These can be cheaper and using these a second or third time is a great eco-friendly thing to do.
3. Packing Materials
You know that Styrofoam is not an environmentally friendly material, and you know that you should avoid using Styro packing peanuts. What are some alternatives? Anything that keeps objects steady and in place can work very well.
Think newspaper, towels, comforters, linens, and even clothing items like blue jeans. If you unfortunately find out that you do need to use some plastic packing materials, do your research and determine which ones are recyclable and find out where to take them in your new city.
4. Skip the Back and Forth
If you are moving a relatively short distance—like 90 miles—you may be tempted to make many trips to avoid using a moving company. You may think that renting a small trailer and taking five days to move will save you money.
Money, maybe, but multiple trips are just not eco-friendly.
Better to get one truck on one day and get the job done.
Even though many people want to try to make the move themselves, take a second and think about the environment and also the time you’ll save by making one large trip – it will pay off in the long run.
Hiring the pros can alleviate big time stress and can make the first trip to your new place much more enjoyable.
5. Get Rid of Stuff
The simplest way to make your move eco-friendlier is to move less stuff. We all have stuff, and many of us have a lot of it.
Our parents may have agonized over the thought of throwing away their 8-track or cassette tapes (!), and if you are an audiophile, maybe you have to think about those plastic crates full of old vinyl records.
Almost everything is available online now as you know and packing up a tiny speaker that plays everything from your phone would be a lot easier than loading up your old tube amplifier, your turntable and those giant Onkyo speaker towers you inherited from your uncle that was addicted to the Dead.
We do realize, however, that this might be a tough one even for strident environmentalists.
Otherwise, just look at everything you are packing and make sure you really need those items. If you don’t, there are a few alternatives. You can donate usable products to homeless shelters. Bet you didn’t know that the number one requested item at homeless facilities is socks!
You can have a garage sale and make some extra money to help with the move. Just be ready to do something with any stuff that doesn’t sell.
And, if you are so motivated, place Craigslist ads for things you don’t want to move like those barbells you never use or even your trusty but older treadmill.
6. Hire the Pros?
If you’re one of the lucky ones who has plenty of time to prepare for an upcoming move, you might want to consider hiring a green moving company.
One of the best ways to make an impact in a positive way on the environment is to use a moving company that does things the right way when it comes to the environment.
A green moving company will use trucks that run on biodiesel instead of normal gas. The company will also implement reusable boxes, so that you do not have to worry about going to the store for more cardboard boxes. These green moving companies might also:
- Offer complimentary use of their eco-friendly boxes,
- Collect all non-reusable moving boxes and send them to a recycling center for you
- Use only biodegradable foam packing peanuts during your move
- Source their own moving boxes from companies that participate in Sustainable Growth programs
- And more!
If you search in your area, you’ll likely find a company that has a green moving program. Just simply ask them when you’re filling out a consultation or moving inquiry and you’ll be on your way to an eco-friendlier move in no time.
7. Green Cleaning
Moving means cleaning your new place, but also your old place. There are some things that you can do to clean both places without the use of harmful chemicals that might cost you a fortune.
Items like vinegar, baking soda, and ammonia are old-school cleaning supplies that will make a low impact on the environment when compared to modern cleaning agents that use a ton of chemicals.
Don’t worry; you’ll still be able to get a perfect clean in your place even without the use of the harmful chemicals. Think about it….your grandparents had to clean during moves, too.
They weren’t using chemicals that were harmful to the environment, so why do you have to?
While you can find articles like this one that will help will eco-friendly moving concerns, there may not be as much information available as there is about eco lighting and HVAC issues.
Nevertheless, with some effort and determination, you can be nice to the planet as you move to a new location.
REIT Scorecard: Top 3 Winners And Losers Last Week
With a difficult and dicey macro environment, how are REIT stocks faring? Are investors looking to diversify their portfolio and increase REIT investments in a volatile stock market environment?
With a comparatively high dividend yield and a stable stream of income, REITs continue to be a good bet for investors. The earnings season is done and the REITs have managed to increased FFO’s (funds from operations) by double digits in Q3.
Here, we look at the top three REIT gainers and losers over the last week.
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