Rent.com Announces Annual College Scholarship Contest

Entries are now being accepted for two $2,500 prizes.

Acknowledging the challenge Americans face in paying for a college education, Rent.com announces the launch of its Student Scholarship Contest, in which two winners will each receive $2,500 to help offset education-related expenses. Prize money can be used to pay for housing, books, tuition, study-abroad or other education-related expenses for the upcoming Fall 2022 semester.

To qualify for entry, applicants must be at least 17 years of age; a U.S. citizen or legally residing in one of the 50 states or the District of Columbia; enrolled in or accepted as a full-time student at an accredited college, university or technical school for the Fall 2021 semester; pursuing a bachelors or associate degree; and have a 2.5 minimum GPA.

Entrants are asked to submit a 500-600 word essay on the topic “What makes your home a home?”; the deadline for entry is April 15, at 11:59 pm ET.

Visit the Rent.com college scholarship page for an official entry form, contest description, deadlines and other information. The complete contest rules can be found here. No purchase is necessary to enter.

Key Dates to Remember

About RentPath

RentPath is the only marketing and automation platform that engages prospective residents through the entire renter journey, maximizing leads and occupancies with unparalleled ROI. Through its broad network of rental listing sites including rent.com, ApartmentGuide.com and Rentals.com, RentPath connects property owners and managers with over 10 million high-intent, in-market renters per month. In addition, the RentPath platform powers a full suite of best-in-class digital marketing solutions across search advertising, social media, email marketing, web chat, resident communication, reputation management and more. RentPath’s holistic solutions simplify the rental search experience for renters while driving occupancies and efficiencies for property managers and owners. RentPath is a Redfin Company.

Source: rent.com

Discounted Cash Flow (DCF) Guide

Discounted cash flow is an income-based approach for valuing an asset. The discounted cash flow formula calculates what an asset is worth today using future cash flows as the basis.

In business settings, analysts may apply the DCF model to determine the value of another business. For example, a company that’s interested in an acquisition or merger may look at the discounted cash flows of comparable companies. But it’s also possible to use discounted cash flow analysis when making investment decisions inside a personal portfolio.

What is DCF?

Discounted cash flow is one of several valuation methods investors use to determine an asset’s value. The technical DCF model definition is: future cash flows multiplied by discount factors to obtain present values.

In simpler terms, discounted cash flow allows investors to estimate the value of something today based on its ability to generate cash flow in the future. This ties into the concept of the time value of money, which assumes that money is worth more now than it would be at some future date. This assumption reflects the possibility of increasing inflation rates or interest rate changes diminishing the value of money over time.

Here’s another way to think of discounted cash flow: It’s a way to predict or estimate future returns on a current investment, whether it’s a stock, a business purchase or something else. In other words, you can use the discounted cash flow formula to figure out if what you get out of an investment might equal or exceed what you put in.

How DCF Works and What It’s Used For

Discounted cash flow analysis provides an estimated value of an investment or asset, based on forecast cash flows to evaluate potential investment opportunities. Investors use DCF to calculate a rate of return and answer the question of how much money an investment can potentially generate, when adjusted for the time value of money.

DCF analysis can have several applications. Some of the scenarios where analysts use discounted as a predictive tool include when evaluating the potential returns on an investment:

•   Calculating the value of a business

•   Estimating the potential return on investment associated with the purchase of business assets

•   Calculating the value of investments in stocks, bonds or other financial securities

Company’s often use DCF valuation when they are contemplating the acquisition of another company. In this scenario, discounted cash flow can give the acquiring company an idea of the value of the company they want to purchase.

Businesses can also use discounted cash flow analysis as a guide for making investments in equipment or other assets. If the investment requires the use of loans or financing to purchase the equipment, the DCF model can factor the interest rate into its calculations to estimate an accurate ROI.

DCF Formula

Discounted cash flow uses a specific formula for determining value. The formula looks like this:

(Cash flow for year 1/(1+r)1) + (Cash flow for year 2/(1+r)2) + (Cash flow for N year/(1+r)N) + (Cash flow for final year/(1+r)

You may also see it simplified like this: DCF = CF1 / (1 + r) 1 + CF2 / (1 + r) 2 + CFN / (1 + r)N + CFF/ (1+r)

Breaking down each element of the discounted cash flow formula can help with understanding how to use it.

Cash Flow

In the DCF valuation model, cash flow simply represents the flow of cash in and out of a business or investment. For example, a business’ incoming cash flow may revolve around sales of its products or services.

Outgoing cash flow would include expenses paid by the business, including payments to suppliers, utility bills, loan payments and taxes. Positive cash flow means the business has more money coming in than going out while negative cash flow means the opposite. A cash flow statement is a standard part of a company’s financial statements.

For a stock, the cash flow might be dividends paid, and for a bond it could be coupon payments.

Discount Rate

In the discounted cash flow formula, “r” represents the discount rate. The discount rate is the interest rate used to determine present value. When using the DCF model to determine business valuations, the discount rate can be applied as the weighted average cost of capital.

The discount rate is important because when used in discounted cash flow analysis calculations, it can tell you if the expected return from an investment is likely to be positive or negative.

Period Number

The final piece of the puzzle in discounted cash flow analysis is the period number, represented by N in the DCF formula. The period number simply means the period of time that you’re using for discounted cash flow analysis. So this might be five years, 10 years, 20 years, or longer, depending on the type of investment or asset you’re trying to find a valuation for.

When calculating discounted cash flow, you can also determine terminal value. This makes it possible to measure the growth rate or return on an investment for projected cash flows beyond the timeframe you’re using for your calculations. So to find this number, you’d multiply cash flow for the final year by (1+ long-term growth rate) and divided by (discount rate – minus long-term growth rate).

DCF Example

Having an example to follow can make it easier to understand discounted cash flow and how it works. So, assume an investor is considering a private equity investment. They plan to purchase a 10% stake in a private company growing at a rate of 5% each year.

Using the discounted cash flow formula, assume that the business generated $5 million in cash flow the previous year. A 10% investment stake would be worth $500,000. Using a 5% growth rate, the stake would generate $25,000 in cash flow the first year, $26,250 in the second year and $27,562.50 in the third year.

Now, say your target rate of return is 10%. Using the discounted cash flow formula with a discount rate of 0.10%, here’s how the numbers would align:

Year Cash Flow Discounted Cash Flow
1 $525,000 $477,273
2 $551,250 $501,136
3 $578,812.50 $526,193
Total $1,655,062.50 $1,004,103

Looking at this chart, you can see what an investment would be worth to you today, based on anticipated cash flows. This can help you decide how much to invest and if the investment is worth it, based on the expected rate of return you might get from putting the money to work elsewhere.

Discounted Cash Flow vs Net Present Value

Discounted cash flow is one of several valuation methods used to determine value of a business or investment. Net present value or NPV is another. The net present value represents the present value of cash flows at the required rate of return relative to the initial investment. Net present value can be used to decide if an investment is worth making, based on the expected rate of return as measured by the value of money today.

So how is this different from discounted cash flow? With discounted cash flow analysis, you’re trying to determine how much projected cash flows are worth using the time value of money. When using DCF analysis, the internal rate of return represents a discount rate that makes the NPV of cash flows equal to zero.

Net present value, on the other hand, can help you determine the net return on an investment after factoring in the initial cost of that investment. To calculate net present value, you’d use the initial investment amount, the discount rate or target rate of return, and the time period for the investment.

Both DCF and NPV can help when making investment decisions. But net present value takes valuation calculations one step further by subtracting the cost of the investment from the discounted cash flow.

Limitations of DCF

Discounted cash flow modeling is not an exact science. DCF analysis requires you to estimate cash flows and the discount rate, so if you estimate either one inaccurately you could end up with valuation calculations that are too high or too low. This can make it difficult to realistically judge the viability of an investment.

It’s also important to remember that valuations can be very sensitive to external factors, such as changing market volatility. It’s difficult to precisely forecast how an investment or business will react to increased volatility or other changes to market conditions. For that reason, discounted cash flow works best as a guide for estimating potential returns, rather than an absolute predictor of outcomes.

How Can DCF Help Investors?

DCF can tell investors if an investment is worth making, based on the anticipated returns.

So, say you want to buy a stock that looks promising. If you have all the appropriate numbers to plug into the discounted cash flow formula, you could reasonably estimate how much of a return you’re likely to see on your investment. Or if you’re considering purchasing a home to use as a rental property, discounted cash flow could tell you what level of returns you’re likely to see on your investment.

Again, it’s important to remember that discounted cash flow is not a 100% accurate way to measure estimated return on investment. But it can be a useful guide for determining whether an investment makes sense for your portfolio, based on your goals, risk tolerance and time horizon.

The Takeaway

Investing is central to growing wealth over the long term and getting started can be easier than you might think. Understanding the basics of discounted cash flow is important when choosing stocks, bonds, or other securities for your portfolio. If you’re investing via a brokerage account or an Individal Retirement Account (IRA), where you choose to invest also matters.

By opening an online brokerage account on the SoFi Invest trading platform, you can start investing with as little as $5. It’s easy and convenient to begin building a portfolio from scratch. If you prefer a hands-off approach, automated portfolios offer diversification.

Photo credit: iStock/AsiaVision


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The 12 Best REITs to Buy for 2022

Real estate investment trusts (REITs) should finish 2021 as one of the stock market’s top performing sectors, barring a surprise late-year disaster. And investors positioned in the best REITs could be set up for a productive 2022.

The main reason REITs remain so popular with investors year after year is the reliable strength of their dividends. Remember: REITs are required to pay out at least 90% of their taxable profits as dividends (in return for some generous tax breaks). And even after a year of big stock price gains, real estate stocks continue to offer impressive yields. The average yield on REITs is presently 2.9%, or more than twice the 1.3% average yield on the S&P 500. Many of the market’s best REITs deliver even more income.

But there are other catalysts pointing specifically to strong REIT performance in 2022.

A major growth driver is the strengthening U.S. economy, which is increasing occupancy rates and rents for real estate in the industrial, housing and shopping-center industries, among others.

“As commercial activity and day-to-day life normalize, demand for commercial and residential real estate space will continue to recover,” says State Street Global Advisors. “Combined with higher rent inflation in 2022, this supports REIT dividend growth and potential valuation appreciation.”

Indeed, unlike most other businesses, real estate investment trusts typically benefit from inflation. That’s because of the structure of REIT leases, which allow frequent rent hikes, as well as rent increases linked to the consumer price index (CPI). Inflation also increases the worth of REIT assets, thus making their portfolios more valuable.

With that in mind, here are the 12 best REITs to buy for 2022. These 12 names stand out because of generous dividends, low valuations, growth prospects, or in most cases, a combination of these and other attributes.

Data is as of Dec. 15. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price. Stocks listed in reverse order of yield.

1 of 12

American Tower

A large cell phone tower like those owned by American TowerA large cell phone tower like those owned by American Tower
  • Market value: $124.9 billion
  • Dividend yield: 1.9%

American Tower (AMT, $274.35) is one of the world’s largest owners and operators of multi-tenant cell towers and related infrastructure. The REIT own 219,000 communication sites worldwide, with large concentrations of cell towers in India (75,000 cell towers), the U.S. (43,000), Brazil (23,000), Germany (14,700), Spain (11,400) and Mexico (10,100).

Cell towers can be highly profitable because they can support multiple tenants on the same structure. The REIT estimates its return on investment (ROI) at 3% for one-tenant towers, 13% for two-tenant towers and 24% for three-tenant towers.  

Demand for cell tower space is steadily rising as a result of growing market penetration for wireless devices, higher data usage per device and mobile data traffic growth. AMT expects all of these trends will drive high-double-digit market growth through 2026.  

American Tower has successfully leveraged the wireless wave, generating 15% average annual growth in revenues, 14% yearly gains in funds from operations (FFO, an important metric of REIT profitability) per share and better-than-20% annual dividend growth since 2012. In addition to steadily rising dividends, American Tower offers an ultra-safe 51% payout ratio.

But what really makes AMT stand out as one of the best REITs to buy for 2022 is how it’s priming itself for growth.

The REIT took a major step in re-positioning for 5G by recently offering $10.1 billion for CoreSite, which owns 25 data centers and has delivered double-digit annual revenue growth over five years. American Tower plans to accelerate CoreSite’s development pipeline and position its two businesses with complementary product offerings and 5G market leadership.

“The growth story remains alive for AMT following the CoreSite acquisition,” says Argus Research analyst Angus Kelleher-Ferguson (Buy), who raised his 2021 and 2022 adjusted FFO (AFFO) estimates for the company. “Following the transaction, American Tower will continue to be one of the best growth stories of all REITs under Argus coverage, as CoreSite brings a strong growth profile.”

It’s worth noting one small strike against AMT, at least for value investors: a forward P/AFFO ratio of 28 that’s well above the sector median of 21.

2 of 12

Americold

A worker jots down something on a pad of paper while inside of a cold-storage unitA worker jots down something on a pad of paper while inside of a cold-storage unit
  • Market value: $8.6 billion
  • Dividend yield: 2.7%

If you prefer the large moats of niche real estate, Americold (COLD, $32.07) is one of the best REITs you can buy.

Americold is the world’s largest real estate investment trust focusing exclusively on temperature-controlled warehouses. The company owns 246 cold storage warehouses representing 1.4 billion square feet of storage capacity, which it leases out to approximately 4,000 tenants. Americold estimates that it holds a 22% shares of the U.S. cold-storage market.

Americold serves customers including Kraft Heinz (KHC), Smithfield, Conagra (CAG) and Walmart (WMT) and has relationships with its top 25 customers averaging 35 years. These top customers all utilize multiple facilities, and 92% of them purchase value-added services. 

Inflation and labor disruptions have negatively impacted 2021 FFO, and Americold recently lowered its full-year adjusted FFO guidance to $1.15 to $1.20 per share from a prior range of $1.34 to $1.40. And in early November, the company let go of CEO Fred Boehloer.

That said, a 15% decline in 2021 might be setting investors up for a good dip-buy for 2022.

Baird analysts say they expect the REIT to fully absorb this year’s 8% to 10% labor cost increases in 2022 by increasing rents and re-negotiating lease terms with long-term customers.

“Given the long occupancy recovery and persistent labor and power cost pressures that are pushing development yields lower, the added uncertainty of a CEO search could create softness,” Baird says. “We suggest adding on meaningful weakness for longer-term investors.”

Americold’s payout is stretched at the moment, at 100% of FFO in 2021, but should drop into the mid-80s range next year on higher 2022 consensus analyst FFO estimates.

3 of 12

Digital Realty Trust

Two people walk alongside some data center infrastructureTwo people walk alongside some data center infrastructure
  • Market value: $48.3 billion
  • Dividend yield: 2.7%

Digital Realty (DLR, $170.37) isn’t just one of the nation’s largest digital REITs – it’s one of the nation’s largest real estate stocks overall.

This REIT owns a global portfolio of 291 data centers that serve more than 4,000 corporate and government customers. This company mainly serves Fortune 500 firms. Its top 20 customers include IBM, Meta Platforms (FB), Oracle (ORCL), LinkedIn, JPMorgan Chase (JPM), Comcast (CMCSA) and Verizon (VZ).  

Customer retention rates average around 80% and are likely to remain high due to high switching costs ($15 million to $20 million) associated with moving megawatts of data to a new facility. Embedded 2% to 4% annual rent escalators and strategic acquisitions supported by Digital Realty Trust’s investment-grade balance sheet have made it one of the best REITs for decades. DLR boasts 11% annual growth in core FFO per share since 2005, as well as 16 consecutive years of 10% average annual dividend expansion.

The REIT’s FFO per share rose 6% year-over-year during the first nine months of 2021; Digital Realty increased full-year guidance to $6.50 to $6.55, easily covering its $4.64 annual dividend.

During the September quarter the REIT formed a joint venture with Brookfield Infrastructure Partners LP (BIP) expanding its digital center footprint in India, negotiated a joint venture with Nigeria’s leading colocation provider, invested in one of Europe’s leading data center providers and sold 10 North American data facilities for $581 million.

William Blair analyst Jim Breen (Outperform, equivalent of Buy) likes that DLR is focusing on international expansion but isn’t overlooking U.S. development.

“Approximately 75% of Digital Realty’s 270 megawatts of development pipeline is outside the United States,” he says. “However, the company still has development in key markets in the United States such as Ashburn, Santa Clara, and Hillsborough, and the company continues to bring on colocation in all of its major colocation markets in the United States.”

Just note that Digital Realty is in a growth industry, and it trades like it. DLR trades at nearly 27 times AFFO estimates, which is a 27% premium to the rest of the sector.

4 of 12

Plymouth Industrial REIT

A large warehouse like those owned by Plymouth Industrial REITA large warehouse like those owned by Plymouth Industrial REIT
  • Market value: $1.0 billion
  • Dividend yield: 2.8%

Plymouth Industrial REIT (PLYM, $29.89) owns distribution centers, warehouses and industrial properties located primarily along the main logistics corridors of the U.S. in secondary markets including Kansas City, Indianapolis, Chicago, Cleveland and Columbus.

The fragmented nature of industrial real estate in secondary markets has helped the REIT to acquire its current portfolio at 55% of replacement cost. In the last five years, Plymouth has closed nearly $900 million in real estate purchases. 

In addition to lower purchase costs, the REIT’s focus on secondary markets has created above-average opportunities for rent growth. Plymouth had 4.7 million square feet of new leases commencing during the first nine months of 2021 at rental-rate increases of 9.7%.     

The REIT’s current real estate portfolio consists of 152 properties representing 26.6 million square feet of leasing space. During the September quarter, PLYM collected 99.7% of rents, acquired 10 buildings totaling 3.4 million square feet, and generated core FFO per share of 43 cents – flat compared to last year due to a higher share count that offset acquisition growth. Plymouth expects to end 2021 with full-year core FFO per share of $1.70 to $1.74. Analysts believe that number will hit $1.90 in 2022.

“Going forward, we have raised our 2022 acquisition target to $375 million (from $325 million) and lowered acquisition cap rate expectations to 6.5% (from 7.1%),” say B. Riley Securities analysts, who say the stock is a Buy. “We expect that in addition to external growth, PLYM should be able to deliver strong rental rate growth.”

This REIT did have to cut its dividend during the pandemic, hacking its 37.5-cent-per-share payout down to 20 cents in June. But it started to claw back some of that ground in 2021, with a 5% hike to 21 cents, and its payout ratio is now a pretty safe-looking 48%. Meanwhile, shares appear reasonably priced at 17 times AFFO estimates.

5 of 12

UMH Properties

A manufactured home like those owned by UMH PropertiesA manufactured home like those owned by UMH Properties
  • Market value: $1.3 billion
  • Dividend yield: 3.0%

After nearly a decade of relatively lackluster performance, UMH Properties (UMH, $25.57) appears to have turned a corner, based on its greatly improved sales and profit growth.

This REIT is the nation’s leading owner/operator of manufactured housing communities. It owns 127 manufactured housing communities containing 24,000 developed home sites across 10 states that are leased to residential homeowners. In addition to home sites, UMH owns a portfolio of 8,700 rental homes and plans to grow its rental unit portfolio by 800 to 900 homes per year.

With 3,300 existing vacant lots to fill and nearly 1,800 acres available to build lease sites for another 7,300 homes, UMH has plenty of room to grow. The REIT is also an active acquirer of housing communities; over the past six years, it has purchased 29 housing communities representing nearly 6,300 homes sites.  

Manufactured housing REITs such as UMH are benefitting from a steady uptick in the number of households owning single-family homes and rising home prices, which make manufacturing housing a more affordable option for first-time homebuyers.

UMH also has many housing communities located near the Marcellus and Utica Shale natural gas fields. Stepped-up development activity at these fields is attracting thousands of oil field workers that need housing. Occupancy rates for UMH’s portfolio have risen steadily since 2016 and currently exceed 86%. 

Over the past four years, UMH has increased revenues by 60%, community net operating income by 67% and normalized funds from operations by 59%. The REIT’s revenues grew 10% during the first nine months of 2021, same-property operating income improved by 15% and normalized FFO per share jumped by 30%. UMH also ended the quarter in great financial condition. Debt is modest at 20% of market capitalization, and its net debt-to-adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) ratio is a slightly below its peers at 4.8.

“Demand for manufactured (affordable) housing remains strong and likely sources of both site and home financing are expected to continue to expand given the change in leadership at the FHFA,” say Wedbush analysts, who rate the stock at Outperform. Among other reasons UMH could be one of the best REITs to buy in 2022: favorable trends in the REIT’s same-property growth, as well as additional potential upside tied to a joint venture deal involving three Florida communities, announced in December.

UMH has paid dividends every year since 1998 and signaled its improving prospects with a 5.5% dividend hike in 2021. This was the REIT’s first dividend increase since 2009.

6 of 12

Stag Industrial

A large industrial logistics facility like those owned by Stag IndustrialA large industrial logistics facility like those owned by Stag Industrial
  • Market value: $8.0 billion
  • Dividend yield: 3.2%

Stag Industrial (STAG, $45.54) owns and operates single-tenant industrial properties across the U.S. Specifically, it owns 517 properties covering 103.4 million square feet of leasing space and valued at $8.7 billion.

STAG has grown through a combination of rent increases and acquisitions and is guiding for roughly 3.5% same-store growth in 2021 – if it hits that target, that would mark the highest same-store growth in company history. The REIT has benefited in 2021 from rent escalators, shorter downtimes between leases and 75% to 80% tenant retention rates. Acquisition volume forecast at $1.1 billion to $1.2 billion in 2021 also would be the highest ever for this REIT.

E-commerce has been a powerful growth catalyst. STAG estimates 40% of its portfolio is engaged in e-commerce fulfillment. Amazon.com (AMZN) is its largest tenant at 3.6% of the portfolio and other large tenants include Eastern Metal Supply, GXO Logistics (GXO), FedEx (FDX) and American Tire Distributors.   

STAG offers a solid balance sheet, seven consecutive years of dividend growth and a conservative 70% FFO payout ratio. Compared to the other best REITs on this list, it’s hardly a steal at 21 times AFFO estimates, but shares still appear moderately priced.

Piper Sandler has included Stag in its “REIT Heavyweights,” which single out 25 companies that have outperformed their peers on eight specific metrics, signaling the ability to perform well in various operating environments. “By targeting [industrial properties], STAG has developed an investment strategy that helps investors find a powerful balance of income plus growth,” Piper’s analysts say.

7 of 12

Essential Properties Realty Trust

An Arby's building, which is one of the types of real estate owned by Essential PropertiesAn Arby's building, which is one of the types of real estate owned by Essential Properties
  • Market value: $3.3 billion
  • Dividend yield: 3.8%

Essential Properties Realty Trust (EPRT, $27.39) invests in single-tenant net lease properties across 45 states. (Net lease refers to a lease structure where the tenant pays all property expenses.)

EPRT owns 1,397 properties representing 12.4 million square feet of space and leased to approximately 300 tenants. Its tenants come from 17 different industries and are primarily service businesses such as medical/dental, automotive repair, casual dining and childhood education; many of these are e-commerce resistant. The portfolio’s weighted average occupancy was 99.9% during the September 2021 quarter.

On average, EPRT pays $2.2 million for a property. This small size makes these properties easier to sell and re-let, and the REIT keeps its tenant acquisition costs low by working with multi-unit operators.

Essential Properties is proactive in managing its portfolio. The company acquired 253 properties for $653 million during the first nine months of 2021. Approximately 86% of these deals were sale-leaseback transactions with weighted average lease terms of 15.3 years. The REIT also sold 36 sites for $55 million and booked a nearly $9 million profit on property sales.  

With more than $400 million of unused borrowing capacity, Essential Properties has plenty of dry powder for acquisitions.

Essential Properties began paying dividends in 2018 and has raised its dividend every year. The last payout increase was by roughly 4% in June. The payout, meanwhile, is moderate at 74% of FFO.

Growth prospects make EPRT one of the best REITs to buy in 2022. The company expects to end 2021 with 18% adjusted FFO-per-share growth; on top of that, it’s guiding for another 13% improvement in 2022, which should also help it bolster the dividend.

“We continue to view EPRT as one of the best positioned net-lease REITs to deliver double-digit growth over the next few years given its small size, quality tenant roster, low leverage and external growth activity,” says Raymond James, which rates the stock at Outperform.

8 of 12

Store Capital

A Bass Pro Shops, which is one of the tenants of Store CapitalA Bass Pro Shops, which is one of the tenants of Store Capital
  • Market value: $9.3 billion
  • Dividend yield: 4.5%

Another net lease firm dotting the best REITs for 2022 is Store Capital (STOR, $34.03), which owns single-tenant properties across the U.S.

This REIT targets middle-market customers like Camping World (CWH), Bass Pro Shops and Spring Education Group that typically generate more than $50 million in annual sales and generate a third of their sales from repeat customers.

STOR owns 2,788 properties that are leased to 538 tenants and enjoys a 99.4% occupancy rate. And with more than 215,000 businesses nationwide fitting its target customer description, Store Capital has plenty of opportunities for growth. 

The company uses a direct origination approach to property acquisitions that keeps purchase costs low, portfolio quality high and the acquisition pipeline full. The REIT’s deal pipeline has some $13 billion worth of properties. This direct origination acquisition strategy has helped Store deliver 5.1% annual growth in adjusted FFO per share and 6.8% yearly dividend gains over seven years.

Portfolio security is helped by longer-than-average leases, with Store’s weighted average remaining lease term at 13.5 years. Additional safety comes from the REIT’s investment-grade balance sheet, which shows 39% leverage and debt at just 3.4 times EBITDA, less than the net lease average of 5.0.

STOR targets 5% annual growth to be achieved through a combination of lease escalations, conservative payout and accretive property sales. The REIT is guiding for 2021 FFO of $1.99 per share, and a 9% increase in 2022 to a range of $2.15 to $2.20 per share.

Store Capital doesn’t have much of a dividend-growth track record, with seven years of uninterrupted raises, but it has held its payout ratio steady around 82%. Meanwhile, STOR shares trade at a roughly 19% discount to industry peers.

And no less than Warren Buffett views Store Capital favorably: STOR is the only REIT in the Berkshire Hathaway portfolio.

9 of 12

Iron Mountain

A datacenter against a white backgroundA datacenter against a white background
  • Market value: $14.3 billion
  • Dividend yield: 5.0%

Iron Mountain (IRM, $49.53) built its original business around the physical storage and shredding of records, though it has for years been transitioning to digital data storage.

This REIT has unmatched scale in physical records, storing documents for approximately 225,000 customers, including 95% of Fortune 1000 companies. In this business, Iron Mountain boasts a 98% customer retention rate, consistent organic growth and 15-year average relationships with customers.    

Iron Mountain is using the reliable cash flows from physical records storage to build digital data storage capabilities. At present, the REIT operates 15 data centers that have 445 megawatts of potential information technology capacity and serve more than 1,300 customers. Approximately 144.7 megawatts of its data center capacity is already leasable, and the REIT has another 66 megawatts under construction and 234.8 megawatts held for development.

The company’s Project Summit initiative is streamlining operations while at the same time sharpening the REIT’s focus on its higher-growth digital business. Iron Mountain expects to achieve $375 million of annual run rate EBITDA benefits from Project Summit by year-end 2021, with another $50 million of benefits realized in 2022. 

Through the end of Q3 2021, Iron Mountain has leased 24 megawatts of digital storage and the REIT is on-track to exceed its original 2021 goal of 30 megawatts leased.  Although digital storage currently comprises only still about 10% of the REIT’s business, data center profit contributions and Project Summit savings are helping boost Iron Mountain’s bottom line.

A recent spate of data center real estate acquisitions, including the $15 billion sale of CyrusOne and the $10 billion CoreSite deal, are reducing the number of big players in the data REIT sector and boosting valuations for the remaining digital REITs, including IRM.      

Iron Mountain has an 11-year track record of paying dividends that includes eight dividend hikes and occasional big special dividends. At present, shares yield 5.3% and payout from adjusted FFO is 81%. A caveat for investors is that the company plans to hold its current $2.47 annual dividend flat until its goal of 60% adjusted FFO payout is achieved.

IRM shares were up nearly 70% through mid-December 2021. But Iron Mountain still could be among the best REITs to buy in 2022 because of a still-appealing forward P/AFFO of 14 – a 31% discount to its peers. Meanwhile, five of the seven analysts covering IRM stock call it a Strong Buy or Buy. Several cite accretion from its data center expansion, supported by recurring revenues from its physical records storage business, as reasons to invest.

10 of 12

Medical Properties Trust

A medical campus with an emergency room and other buildingsA medical campus with an emergency room and other buildings
  • Market value: $13.1 billion
  • Dividend yield: 5.1%

Medical Properties Trust (MPW, $22.02) operates hospitals, inpatient rehabilitation centers and behavioral health facilities worldwide and is the industry’s second largest non-government owner of hospitals. The REIT owns 442 medical properties across 34 states and nine other countries, which are leased to 52 healthcare systems in the U.S. and overseas. Acute care hospitals are the backbone of a portfolio valued at $21.4 billion.

Medical Properties Trust’s largest tenant is Steward Healthcare, which leases 36 properties and represents roughly 2.6% of the portfolio. Other major tenants include Prospect Medical Holdings (U.S.), Circle Health (U.K.) and Swiss Medical Network (Switzerland). 

Safety is embedded in the portfolio not only by the credit quality of its large tenants, but also by a net leasing structure where tenants bear all property costs. The REIT’s leases have 10- to 20-year initial terms and feature inflation-based or fixed-rate annual rent escalators.

Medical Properties Trust’s sale-leaseback acquisition model facilitates portfolio expansion while helping hospital tenants to free up cash that can be used for site improvements. During the September 2021 quarter, the REIT sold Macquarie Asset Management a 50% interest in eight Massachusetts hospitals for $1.3 billion; entered into a $900 million sale-leaseback of five Florida hospitals and a $760 million sale-leaseback of 18 inpatient behavioral health centers; and acquired a cancer treatment center in Portugal for $20.4 million.  

The REIT’s adjusted FFO per share rose 12% in the first nine months of 2021 to $1.01. Medical Properties Trust is guiding for annual run-rate adjusted FFO of $1.81-$1.85 and a 6.0 times ratio of net debt-to-EBITDA.  

MPW has been growing its dividend for eight consecutive years, at an average annual rate of 3% over the past half-decade. Its payout ratio, meanwhile, is a conservative 64% of funds from operations. Meanwhile, shares trade for a little more than 16 times adjusted FFO estimates, which is a 22% discount to industry peers.

“The company’s tenant base is improving, in large part due to the largest tenant’s ability to turn around the operations of some hospitals,” say Stifel analysts, who rate the stock at Buy and add that “the current stock price is attractive in absolute terms.”

11 of 12

Postal Realty Trust

A Post Office building for the USPS which is the primary tenant of Postal Realty TrustA Post Office building for the USPS which is the primary tenant of Postal Realty Trust
  • Market value: $330.1 million
  • Dividend yield: 5.1%

Postal Realty Trust (PSTL, $17.75) is the biggest REIT in an unusual niche: post office properties.

PSTL is the nation’s largest owner and manager of facilities leased to the United States Postal Service. The REIT’s portfolio currently consists of 926 properties representing 21.3 million square feet of leasing space in 49 states, and it serves as manager for another 397 postal properties. Postal Realty Trust’s portfolio is 99.6% leased, has four-year weighted average lease terms, and its rents average $7.92 per square foot.

USPS is a best-in-class tenant that is recession-resistant and makes 100% of rent payments on-time. Since rents represent just 1.7% of annual USPS expenses, the burden the REIT’s leases impose on this tenant is minimal. 

Since its IPO in 2019, Postal Realty Trust has grown its portfolio by 243%, rental income by 310% and its quarterly dividend by 257%, which includes nine consecutive quarters of rising its payout.

USPS has America’s largest retail distribution network and presents enormous opportunities for Postal Realty to grow via site acquisitions. Of approximately 31,000 postal facilities nationwide, nearly 26,000 are privately owned and thus potential acquisition targets for this REIT.

As e-commerce has grown, postal facilities have emerged as the principal provider of “last mile” delivery services. This has supported 11.9% packing and shipping revenue growth for USPS since 2012. 

The REIT closed $19 million of property acquisitions during the September quarter, grew rental income 70%, generated adjusted FFO of $4.8 million, or 27 cents per share, and raised its dividend approximately 5%. Postal Realty Trust will exceed its $100 million acquisition target for a second year in a row and analysts forecast 2021 FFO per share of 96 cents rising to $1.06 next year.

While Postal Realty Trust’s dividend payout is on the high side at 93%, its high FFO per share growth should gradually reduce payout over the next two to three years.

“We believe there is a relatively strong moat around PSTL’s external growth for the next few years because few institutional investors focus on the space and limited capital sources make large-scale acquisitions difficult,” say Stifel analysts, who rate the stock at Buy. “In addition, the ownership of real estate leased to the USPS is very fragmented.”

If you want the biggest fish in a still-sizable pond, PSTL is among the best REITs you can buy in 2022.

12 of 12

W. P. Carey

A semi truck pulls out of a warehouseA semi truck pulls out of a warehouse
  • Market value: $14.9 billion
  • Dividend yield: 5.3%  

W. P. Carey (WPC, $79.78) specializes in net lease commercial properties across the U.S. and Europe and is one of the world’s largest owners of net lease assets.

W. P. Carey owns 1,264 properties together representing 152 million square feet of leasing space. Its portfolio is weighted towards industrial, warehouse and office properties, with lesser amounts of retail and self-storage.  

The REIT leases properties to 358 tenants and enjoys a 98.4% occupancy rate and a 10.6-year average remaining lease term. Its top American tenants include U-Haul, Advanced Auto Parts (AAP) and Extra Space Storage (EXR); top tenants in Europe include DIY retailer Hellweg, auto dealer Pendragon and the Spanish government.

W. P. Carey is better positioned than most REITs to benefit from inflation. That’s because 99% of its leases incorporate contractual rent increases, and 59% have rent increases tied to CPI.

While dividend payout is on the high side at roughly 75% of cashflow, W. P. Carey has increased dividends 24 years in a row, indicating its ability to grow even through downturns. Dividends are also supported by an investment-grade balance sheet; importantly, there are no significant debt maturities before 2024.

In a November note to investors, Raymond James analysts highlighted WPC’s lowered cost of debt, abundant acquisition opportunities in Europe and the $2.5 billion liquidation of CPA 18, the last of WPC’s managed portfolios.

“WPC continues to hit the gas on acquisitions and is sticking to its more differentiated sandbox,” say Raymond James analysts. “There continues to be a lot of opportunity in Europe – while Realty Income’s (O) expansion overseas is a validation of WPC’s strategy, they don’t expect O’s presence will materially impact competition as there is plenty to buy.”

WPC shares are attractively priced at 15 times expectations for adjusted funds from operations, a 24% discount to REIT industry peers. It’s also the highest yielder among our best REITs to buy for 2022, at well above 5%.

Source: kiplinger.com

Capitalization (Cap) Rate Definition – How Real Estate Investors Use It

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One of the greatest advantages of real estate investments lies in their ability to generate ongoing passive income. 

It’s certainly what attracted me to rental properties. Because with enough passive income, you can cover your living expenses and retire early. 

And capitalization rates — cap rates for short — let you compare properties’ income potential, compare different real estate markets, and more. You can do all the math on the back of a cocktail napkin, even after your second or third helping. 

What Are Cap Rates?

Cap rates might sound jargony, but they’re actually extremely simple. 

In short, they simply represent the net return on investment (ROI) you can expect an income property to generate each year, in the form of cash flow. Cap rates don’t include returns from appreciation, and they don’t account for financing, to help you just compare income yields. 

Thus, they offer a shorthand way to compare cash flow on different properties if you buy in cash.

Capitalization Rate Formula

You don’t exactly need a degree in mathematics to calculate cap rates. Here’s the formula for capitalization rate:

Cap Rate = Annual Net Operating Income (NOI) ÷ Purchase Price (or Value)

For example, imagine a property nets $8,000 in income per year and it costs $100,000 to purchase. That makes the cap rate 8%. Just remember this is a simplified stand-in for ROI, so don’t mistake it for your actual cash-on-cash return (more on that later).

While the purchase price is easy enough to understand, the annual net operating income requires a little explaining and a formula of its own. 

Calculating Net Operating Income

A property’s NOI is simply the net income it generates each year, after operating expenses. 

Operating expenses are easy for novice investors and non-landlords to overlook or try to ignore. But the fact is that most rental properties come with expenses that average around half the rent when averaged over time. There’s even a term for it in the world of real estate investing: the 50% rule. 

These non-mortgage expenses include: 

  • Vacancy rate
  • Property management costs
  • Repairs and maintenance
  • Property taxes
  • Insurance
  • Accounting, bookkeeping, travel, legal costs, and other miscellaneous costs

So when you buy your first rental property, if it rents for $2,000 per month, expect around $1,000 of that to go to non-mortgage expenses. It won’t happen every single month, but you can expect expenses like that averaged out over time. 

Oh, and word to the wise: even if you plan to self-manage rather than hiring a property management company, budget for property management fees. It’s still a labor expense, whether you do the labor or you pay a property manager to do it for you. Besides, the day will likely come when you either can’t or no longer want to field 3am phone calls from tenants complaining that a light bulb burned out.

How to Forecast Expenses

Your cap rate figures will only be as good as the expense numbers you plug into the formula.

For each expense figure above, do your due diligence. Call up local landlords, property managers, and real estate agents to find out the vacancy rate in that neighborhood. Look up the local property tax rate, and multiply it by the purchase price. Get quotes for property insurance, and so on. 

In other words, get real numbers wherever possible — don’t guess. 

With repairs and maintenance costs, I usually estimate around 13% of the rent. But depending on the age and condition of the property, expect them to average out to 10% to 15% of the rent over time.


How Do Real Estate Investors Use Cap Rates?

Cap rates come in handy in several ways as a real estate investor. While some investors use this metric for other purposes, keep the following three main uses in mind as you explore single-family or multifamily real estate investments.

1. To Compare Properties

Imagine two identical properties down the street from one another. They both cater to the same quality of tenant, and both are in the same condition. Which should you buy?

In theory, you should buy the one with the higher cap rate because it will deliver a higher rate of return. 

Cap rates offer a quick and dirty way to compare rental income returns on investment properties. They offer a shorthand for a property’s income yield to help you compare properties. 

While the example above is uncommon, consider a more common one. After looking around town, you come up with several properties that look promising. One of them offers a cap rate of 8%, another offers a cap rate of 10%. The property with the higher cap rate sits in a lower-end neighborhood, with more crime and higher turnover rates. 

Which one you buy depends on your risk tolerance, and your tolerance for landlording headaches. You may well opt for the property with the lower cap rate to avoid the higher risk of break-ins, more frequent turnovers, more difficult tenants, and so forth. Knowing the cap rates of both options helps you compare the properties and decide whether the higher return is worth the risks.

If you buy turnkey properties on Roofstock, you can filter properties across the country by cap rate. Which can not only help you find appealing properties, but also appealing real estate markets.

2. To Find Attractive Markets

I actually find the best use of cap rates to be identifying higher-profit housing markets for investors. 

For example, as much as tenants and housing activists love to complain about the rents in San Francisco, the ratio of rents to home prices there actually favors tenants — by a lot. So much so that rental investors can expect negative cash flow if they finance a typical rental property there. 

In Memphis, however, investors get far more rent for each dollar of purchase price. The ratio of rents to home values favors landlords, leading to high cap rates. It also doesn’t hurt that median home prices in Memphis are a tiny fraction of those in San Francisco, making it easier to invest there.

By researching cities with higher cap rates, you can find markets with high rents relative to asset values. And in doing so you can identify some of the best cities for real estate investors that the nation has to offer.

3. To Set an Offer Price Limit

Often real estate investors set a floor for the minimum cap rate they’ll accept for a property. That in turn helps them set a ceiling for the most they’re willing to pay for any given property. 

For example, imagine an apartment building generates $18,000 in net income each year. The seller wants $300,000 for it, which would mean a cap rate of 6% ($18,000 ÷ $300,000 = 6%).

Your minimum cap rate is 7% however, so you offer $257,000 as your highest and best offer ($18,000 ÷ $257,000 = 7%). The seller can agree or decline, but either way you know you’ve stayed within the bounds of your investment strategy. 

It frees you to ignore what other people think the market value of the property is, and focus on maintaining your own minimum standards for returns. 


Limitations of Cap Rates

Despite their uses as a simple way to compare properties and make investment decisions, cap rates come with several limitations. 

First, the very thing that keeps them simple and allows them to compare properties on equal footing is what limits their usefulness for you personally. By ignoring financing, you can compare apples to apples among properties — but that tells you nothing about what you can personally expect to earn on your own cash investment. 

Your cash-on-cash return is the return you receive on your actual cash invested in the deal. That includes your down payment, closing costs, and any initial repairs and carrying costs before you rent out the property. And don’t assume that mortgages always improve your cash-on-cash return, either. Leverage can turn a mediocre cap rate into negative cash flow each month. 

Imagine a property that offers a 7% cap rate if you were to buy it in cash. You buy it for $100,000, and after all expenses, you net $7,000 each year. Now imagine you were to finance $80,000 of that property, and you net $2,600 per year (after the mortgage payments) on your $20,000 cash down payment. That would put your cash-on-cash return at 13% (ignoring closing costs in both cases, for the sake of a simple example). 

Cap rates can help you do a quick analysis, but cash-on-cash return is your true bottom line for any given property. Make sure you calculate the net annual income you can expect on your total cash invested. 

Finally, remember that financing terms and opportunities can vary from one location to the next. 

You might be able to borrow money at 4.5% interest from a lender in one state, but 6% interest in another where regulations are tighter and fewer lenders operate. Or in high-regulation states, lenders might offer a lower loan-to-value ratio, requiring a 30% down payment instead of 20%. Or lenders could charge higher loan fees in those states, or transfer taxes and recordation fees could be higher. 

Cap rates don’t include borrowing terms or closing costs, but these factors impact your profitability and returns nonetheless.


What Makes a “Good” Cap Rate?

Every investor has a different answer for what they consider a good cap rate. Even so, rental properties come with far more hassles and work than truly passive investments like real estate investment trusts (REITs), so you should demand higher returns on them. 

I personally wouldn’t invest in a property with a cap rate under 7% or 8%, and I wouldn’t exactly get excited about those numbers. I can earn higher returns on real estate crowdfunding through platforms like Fundrise, Streitwise, and GroundFloor without the rent defaults, eviction moratoriums, or phone calls from alleged adults who don’t know how to change a light bulb. 

Those platforms also require a far lower minimum investment, and let me diversify my funds into commercial properties and real estate assets all across the country. 

But because platforms like Roofstock have made it so much easier to buy real estate properties from anywhere, buyers have flooded a once-niche market and driven prices up and returns down. That makes the average cap rate on U.S. properties unappealing to me, so deals have to be exceptional for me to consider them in today’s housing market. 

What’s a “good” cap rate? One that beats other real estate investments by enough margin to justify all the headaches that come with being a landlord. 


Final Word

Cap rates offer an easy way to compare potential returns on different investment properties. Consider them a fundamental that every new real estate investor should understand. 

But they lack nuance, and should be treated as a high-level valuation tactic, not the basis for your investing decisions. 

Use them to find good markets and review comparable properties, or to set price ceilings. But remember that they’re only as useful as the accuracy of the numbers you plug into the cap rate formula. If you underestimate vacancy rates or repair costs, it throws off your cap rate calculations — and your bottom line. 

Don’t like the idea of all this research to invest in real estate? Skip the labor and learning curve required to buy rental properties, and invest through real estate crowdfunding platforms instead.

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Source: moneycrashers.com

10 Home Improvement & Remodeling Ideas that Increase Home Value

Buying a house can be a great investment, but only if you increase its resale value while you live there. That means exploring which remodels and upgrades are worth the time and effort.

Instead of losing yourself in a sea of home improvement ideas and dreams, evaluate which pursuits come with the highest return on investment (ROI) to ensure you not only improve your space for you and your family but for potential buyers in the future as well.

10 Home Improvement Projects That Add Value to Your Property

Whether you buy a brand new home or one that’s already been lived in, there are always upgrades and renovations you can take on to improve the space.

From a simple fresh coat of paint to a full kitchen remodel, here are some home renovation projects that will help to increase your property’s value and add comfort and convenience to your life as a homeowner.

1. Major or Minor Kitchen Remodels

Kitchen upgrades, whether major or minor, are a great way to increase the value of your home. According to Remodeling Magazine, you can expect to recoup anywhere from 53% to 72% on your kitchen remodel depending on the type of renovation you do, the materials you use, and where you live.

Minor kitchen upgrades include small projects such as:

  • Putting in a new backsplash
  • Refinishing cabinets
  • Updating light fixtures
  • Adding an island
  • Increasing storage space
  • Upgrading faucets

Major kitchen renovations include:

  • New cabinetry and countertops
  • Installing wood, laminate, or tile flooring
  • Adding windows, doors, or even square footage
  • Upgrading to high-end appliances
  • Adding seating, dining, storage, or cooking space

When considering a kitchen upgrade, remember to stick within your remodeling budget and keep the space functional and relevant to the rest of the property.

For example, if you live in an older home with a lot of old-fashioned charm, a modern restaurant-style kitchen with industrial appliances might feel out of place and could be a turn-off for prospective buyers.

2. Bathroom Upgrades

Bathroom remodels are another way to increase your home’s value and make it more appealing to future homebuyers.

Depending on your bathroom renovation budget, you can explore a variety of potential projects, including:

  • Installing new sinks, tubs, showers, or toilets
  • Painting, retiling, and reflooring
  • Adding storage space
  • Putting in a vanity or mirror
  • Upgrading lighting

Another option is to add a bathroom to your home, especially if you only have one to begin with. Homes with multiple bathrooms are a hot commodity in the real estate market, and you’ll likely appreciate the convenience as well.

Popular ways to add a bathroom include adding an ensuite to a master bedroom or turning a closet or other unused space into a half-bath on the main floor. Just beware that adding a bathroom or creating a master suite where one doesn’t already exist can get expensive quickly and may not add resale value to the home.

3. Room Reinventions

Many homes come with extra, unfinished space that’s just waiting to be used, such as basements, attics, and bonus rooms.

As a homeowner, leaving that space untouched just means you have square footage you aren’t taking advantage of. Making the most of those unused rooms will increase your living space and make your home appealing to potential homebuyers.

Plus, it’s typically much less expensive than adding additional floor space to your home.

Some projects to explore include turning an unused space into a:

  • Playroom
  • Game room
  • Home gym
  • Home office
  • Separate suite
  • Second living room
  • Library or study
  • Guest bedroom

4. Outdoor Oases

Projects that make your outdoor space more accessible and functional also increase home value. Depending on the materials you use, such as wood or composite decking, decks and patios can have an ROI of more than 64%.

Other options include stone and brick patios and lower decks, which can make great DIY projects if you happen to be handy.

If you already have a deck or patio, pressure wash and refinish it if necessary. Repair or replace any old, rotting boards or broken pavers, and strip flaking paint and stain. Sprucing up your existing outdoor structures is a low-cost way to increase your home’s appeal to buyers and add to the overall desirability of your property.

5. Keeping the Home Up to Code

Depending on the age of your property, there are probably some home improvement projects that can be done to bring it up-to-date in terms of residential building codes.

For example, many older homes may benefit from new:

  • Electrical wiring
  • Plumbing
  • Windows
  • Insulation
  • Hot water heaters
  • HVAC systems
  • Roofing

Home renovations like these are typically best suited to older homes that haven’t been updated in the past. And while they can be pricey, they’re often worth it because they’ll add value to your property and make it safer and more comfortable for you — and future occupants — to live in.

6. Energy-Efficient Extras

Energy-efficient appliances and building materials come with a host of benefits. Not only do they help to save money on energy costs, but they can also reduce your home’s environmental impact. Here are some projects to consider:

  • Install solar panels
  • Purchase Energy Star appliances
  • Invest in a smart thermostat
  • Replace old windows
  • Swap out poorly insulated exterior doors
  • Improve insulation

Many of these energy-efficient remodeling projects qualify for federal and state green energy tax credits, benefitting you in more ways than one.

To figure out how to improve your home’s energy efficiency, consider a professional home energy audit. Many gas and electricity providers offer evaluations that provide you with an energy score and tips for how to boost your home’s efficiency.

The ROI of energy-efficient home improvements varies greatly based on the project you take on. For example, according to EnergySage, insulating an attic comes with an average return on investment of just under 117%.

7. Interior Design

A little interior design goes a long way. Simple and straightforward design updates help to stage your home for sale and come with relatively small price tags. If you’re looking for some easy but worthwhile home improvement projects to increase your property’s overall value and entice buyers, consider:

  • Updating light fixtures
  • Replacing light covers and heat registers
  • Swapping out old door knobs and hardware
  • Installing custom window coverings, such as blinds
  • Modernizing your paint colors
  • Repainting baseboards, ceilings, and interior doors
  • Adding crown molding

Although these jobs may seem less impressive than large-scale renovations, don’t underestimate how much the visual appeal of your home can affect its value. The color you choose to paint a room can have a major impact on how much your home sells for, as a recent report by Zillow shows.

8. Considered Curb Appeal

Your home’s curb appeal is directly related to whether it makes a positive first impression on potential buyers. And there are a variety of different ways you can make your home stand out, even from the street.

Some of the best home projects for improving curb appeal include:

  • Replacing, repairing, or painting wood, brick, or vinyl siding
  • Painting or purchasing a new entry door
  • Replacing a weathered garage door
  • Adding stone veneer to your entryway
  • Installing new lighting

According to the same Zillow report, simply painting your front door a darker color, such as black or charcoal, can increase your home’s sale price by more than $6,000. Which is pretty impressive, considering a can of paint typically costs less than $100.

9. Landscaping

Landscaping your property also adds to curb appeal and makes your home look more enticing. Potential landscaping projects include:

  • Reseeding or resodding your lawn
  • Weeding flower beds and planters
  • Adding hanging baskets, flower beds, or planters
  • Planting trees
  • Replacing old mulch
  • Removing dead trees and bushes
  • Raking up old grass and leaves

Many of these projects are low-cost and have the added benefit of being DIY-friendly, meaning you won’t have to pay a professional to do them for you. The Washington Post puts the potential ROI of landscaping projects between 150% and 1,000%, meaning they’re likely to pay off handsomely in the end.

10. Smart Home Automation

Smart home devices are becoming increasingly popular in the real estate world, helping to boost home values and add new appeal for prospective buyers. Some of the most in-demand smart home upgrades are:

  • Smart thermostats
  • Smart home security systems like doorbell cameras
  • Smart smoke, carbon monoxide, and radon detectors
  • Smart lights

Consumer Reports estimated smart home automation can increase a home’s overall value by 3% to 5% in 2016, which is likely to increase as more people become familiar with smart home devices and home automation.

While it can be hard to figure out exactly how much value these upgrades add to your home, your real estate agent will be able to help you price your home accordingly.


Final Word

Home improvement projects can be difficult to prioritize and budget for, which is why it’s important to choose the ones that come with the most benefits. If you plan to sell your home at some point down the road, focus on remodels and renovations that will boost your property value instead of decreasing it.

Stick to a budget and work with a realtor to figure out where to start as you prepare your property for sale.

Source: moneycrashers.com

AcreTrader Review: Investing in Farmland

Key Takeaways

  • AcreTrader charges a flat fee of 0.75% per year
  • AcreTrader works by letting you buy income-producing shares of a working farm.
  • You must be an accredited investor to use AcreTrader, so it’s not available to the average Joe. 
  • Shares last for 10-15 years, and right now, there’s not really a way to liquidate your money before that time.
  • There’s a lot to like about farmland investing and there hasn’t really been a good way for non-experts to invest in it until now. 

Investing in real estate has always been a strong way to grow your wealth if you know what you’re doing. There are also a lot of ways to toss your hat in the ring with real estate investing, and one of them has remained mysterious and alluring to many people: farmland investing. 

It’s a great way to diversify your portfolio with an investment that’s a lot different from anything else you might have, and that has a lot of desirable qualities. But there’s one problem: evaluating good farmland is a rare skill most of us don’t have, and it takes a huge amount of money. 

Until recently, that is: a new company called AcreTrader offers a platform where you can invest in farmland real estate with absolutely no knowledge and at a fraction of its traditional price. AcreTrader offers a uniquely new way to invest, but it’s not for everyone. We’ll help you figure out if it’s worth looking into further in this review.

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About The Company

AcreTrader is a relatively new company, having been founded by a small team of agriculturally- and financially-inclined investment professionals in 2018. AcreTrader is modeled a bit after other popular fintech investing apps in that it lets you choose your investment in bite-sized chunks. Except in this case, those investments are actual whole farms that the AcreTrader team individually vets and chooses. 

Each individual piece of farmland is put in its own LLC so that it’s separate from AcreTrader. Thus, if AcreTrader ever goes under, your investments will still keep chugging along. AcreTrader then offers shares of those pieces of farmland, with each share being 1/10 of an acre (i.e., if you bought 10 shares, you’d own one whole acre). 

AcreTrader also operates its own real estate brokerage to purchase the properties. The AcreTrader team also acts as a property manager by working with the farmers who it rents the land out to, and handling all of the business details and payments. 

It then passes the money back to you in the form of one cash payment every December. Farms are also sold after five to 10 years, and at this point, you’ll receive your initial investment back at a (hopefully) appreciated rate. Thus, you’ll earn money in two ways: through annual payments, and from appreciation on the property at the end of the contract. 

How AcreTrader Works

Once you’ve created an account and linked your bank, you’re free to start buying shares of farmland. If you’re used to the oodles of investment options available with other investment platforms, though, you might be a bit disappointed by the offerings. 

There’s typically only one farm you can invest in at any one time, with a new one becoming available every 1-2 weeks. Since AcreTrader manages everything in house, it takes time, after all. In fact, AcreTrader has only offered 39 properties for investing since it began. 

Each listing will tell you a brief description of the farm including what’s grown on it and where it is, along with what the gross cash yield and net annual return is expected to be. There’s also an investment minimum with each property, which as of this writing ranges from $15,200 to $36,375 for recent properties. That’s a lot of money, but it’s a lot less than the hundreds of thousands or millions of dollars it typically takes to buy a whole farm.

The listing also tells you the anticipated ownership duration. AcreTrader doesn’t plan on keeping the properties indefinitely; it will sell them at some point in the future (usually within five to 20 years), depending on market conditions. 

This means you need to be in it for the long haul, because while AcreTrader is working on a marketplace where you can buy and sell your shares, there’s no easy way to liquidate your investment right now. In other words, don’t bet the farm on it. Make sure you’re still diversified, and that you have plenty of money left in your emergency savings first.  

Unique Features

AcreTrader is a lot different than any other investing platform you’ve probably seen, and here’s why:

  • You can invest in farmland: Investing platforms let you invest in a lot of things: stocks, bonds, index funds, mutual funds, rental real estate, precious metals, and more. But until now, you really couldn’t invest in farmland very easily outside of a mutual fund without becoming a dedicated agricultural investor. 
  • You can choose the individual farms: AcreTrader adds a bit of novelty in by letting you choose the individual properties you want to invest in. So if you’ve got a hankering for corn, apples, soybeans, or something else, this could be a fun way to invest. 
  • You’re in it for the long haul: Shares of farms can’t be sold through AcreTrader currently, unlike with a lot of other investing choices you might have. This is not a liquid investment, and you’ll need to take that into account.

Who AcreTrader Is Best For?

Anyone can create an account on AcreTrader, but in order to actually invest through it, you’ll need to be an accredited investor. That means you’ll need a net worth of at least $1 million (not counting your primary home) or an annual income of $200,000 or more ($300,000 if you’re married). AcreTrader says it’s working on expanding who can invest, but for now, only high-profile investors can use the platform. 

Since you can’t really sell your shares until AcreTrader decides it’s the right time, it’s also better for people who are looking for a long-term investment and who don’t mind handing over control of the sale date to someone else. 

Finally, AcreTrader might be a good choice for you if you’re looking to diversify your portfolio into a unique type of investment that offers better-than-average returns when compared to bonds, but without a lot of volatility: more on that below. 

AcreTrader vs. Other Real Estate Investing Competitors 

AcreTrader is only one of a few new companies that have started up recently in the crowdsourced farmland investing space. Here are a couple of its direct competitors, along with how it compares:

AcreTrader FarmTogether FarmFundr
Accredited investors only? Yes Yes Yes
Investment Minimums $10,000 – $25,000 $10,000 $10,000 – $100,000
Investment Type Farmland real estate Farmland real estate Farmland real estate
Fees 0.75% Varies by deal, but one recent deal was listed at 2.00% of the total deal amount, plus an annual management fee of 1.50% Varies by deal, but one recent deal listed an “annual sponsor fee” of 1.50%
Expected Returns NAR of 5% – 12.2% IRR of 7.1% – 12.1% Also varies, but one recent project calculated an expected annual average ROI of 13.33%

What To Know About Investing in Farmland

Investing in farmland real estate is not the same thing as your traditional residential real estate deals that you might be more familiar with. After all, the global population is only going up while the amount of available farmland is currently going down, and this gives farmland a unique set of characteristics compared with other types of real estate. 

As an asset class, it’s about as volatile as bonds, while also outperforming them. It’s even outperformed the S&P 500 at key times, such as when the stock market as a whole is going down. In fact, farmland has only had one quarter of negative returns in the past 22 years, and even that was just a -0.01% drop.

The Bottom Line

AcreTrader offers a relatively new way to invest in farmland real estate, and there are a lot of advantages to adding it to your investing mix. But it’s definitely not right for everyone. Right now, only accredited investors are eligible, and even then, your investment is basically as illiquid as you can get for the time being. Since it’s such a new company, it also doesn’t have a proven track record by which to judge it.

That said, AcreTrader offers a lot of promise for making farmland real estate investing more attainable for the average person. It’s just not quite there yet. 

AcreTrader FAQs

About the Author

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Lindsay VanSomeren is a freelance writer living in Kirkland, WA. She has been a professional dogsled racer, a wildlife researcher, and a participant in the National Spelling Bee. She writes for websites like Credit Karma, LendingTree, The Balance, and more. In her spare time she enjoys fitness, craft beer, reading, and outdoor adventures. Follow her on Twitter @FiSciLindsay.

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