Providing Investments in Multifamily Housing.
Focused on Midwest Markets. Managed with Midwest Values.
WHAT IS A REIT?
A REIT, or Real Estate Investment Trust, is a type of real estate company modeled after mutual funds. REITs were created by Congress in the 1960s. A REIT is a unique investment option, as it gives investors the freedom and opportunity to invest in income-producing real estate without the liability and cost of direct real property ownership. Investing in a REIT is similar to how many people invest in stock, mutual funds, or their employer's 401k. There are two main categories of REITs: mortgage and equity. A mortgage REIT buys loans through several different vehicles and returns the interest earned to its shareholders in the form of a dividend. Equity REITS buy income-producing property, such as apartments, offices, or hotels. Income generated through the collection of rent is then returned to the shareholder in the form of a dividend. Missouri Valley REIT is an equity REIT that buys Class B multifamily housing in the Midwest.
HOW DOES A REIT WORK?
Like the rest of corporate America, the REIT industry uses net income, as defined under Generally Accepted Accounting Principles (GAAP), as the primary operating performance measure.
The REIT industry also uses funds from operations (FFO) as a supplemental measure of an REIT’s operating performance. The National Association of Real Estate Investment Trusts (NAREIT) defines FFO as net income (computed in accordance with GAAP) excluding gains or losses from sales of most property and depreciation of real estate. When real estate companies use FFO in public releases or SEC filings, the law requires them to reconcile FFO to GAAP net income.
Most real estate professionals, as well as investors, believe that commercial real estate maintains residual value to a much greater extent than machinery, computers, or other personal property. Therefore, they view the depreciation measure used to arrive at GAAP net income as generally overstating the economic depreciation of REIT property assets and the actual cost to maintain and replace these assets over time, which may in fact be appreciating. Thus, FFO excludes real estate depreciation charges from periodic operating performance. Many securities analysts judge an REIT’s performance according to its adjusted FFO (AFFO), thereby deducting certain recurring capital expenses from FFO.
WHY SHOULD I INVEST IN A REIT?
REITs are total return investments that typically provide high dividends plus the potential for moderate, long-term capital appreciation. Long-term returns of REIT stocks are likely to be somewhat less than the returns of higher risk, high-growth stocks and somewhat more than the returns of lower risk bonds.
REITs are required by law to distribute each year to their shareholders at least 90% of their taxable income. Thus, REITs tend to be among those companies paying the highest dividends. The dividends come primarily from the relatively stable and predictable stream of contractual rents paid by the tenants who occupy the REIT’s properties. Because rental rates tend to rise during periods of inflation, REIT dividends tend to be protected from the long-term corrosive effect of rising prices.
Risk Disclosure: Alternative investment products, including real estate investments, notes & debentures, hedge funds and private equity, involve a high degree of risk, often engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, are not required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual funds, often charge high fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager. Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop. There may be restrictions on transferring interests in any alternative investment. Alternative investment products often execute a substantial portion of their trades on non-U.S. exchanges. Investing in foreign markets may entail risks that differ from those associated with investments in U.S. markets.
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Springfield, MO 65804
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NO OFFER OR SOLICITATION: The contents of this website: (i) do not constitute an offer of securities or a solicitation of an offer to buy of securities, and (ii) may not be relied upon in making an investment decision related to any investment offering by Missouri Valley REIT, or any affiliate, or partner thereof. Investment offerings and investment decisions may only be made on the basis of a confidential private placement memorandum issued by MV REIT. MV REIT does not warrant the accuracy or completeness of the information contained herein.