Performance figures for each account are calculated using time weighted rate of returns on a daily basis. The Composite returns are calculated based on the asset-weighted monthly composite constituents based on beginning of month asset mix and include the reinvestment of all earnings as of the payment date. Composite returns are as follows:

Invest Like a Kennedy: Building a Real Estate Empire, Part 4

By David Sung & Wayman Crosby

Read the original article online

Reader note: This is part four of a four-part series

Part 1 | Part 2 | Part 3 | Part 4

Up to this point, we’ve explored how to develop a real estate empire by examining the principles behind real estate as an investment, what conditions are necessary to get started, and what you need to know about real estate investing in order to build your own portfolio.

Now that we have sufficient background, how is this put into practice?

The template we will use to illustrate this is the actual process we go through to assess and acquire—or turn down—real estate properties for SPIRE LP which is Nicola Wealth Management’s hard asset real estate portfolio. While this is not a “personal real estate portfolio,” the same principles apply, from how to source and recognize opportunities, to the need for due diligence and maintenance. The difference lies in the structure implemented by which investors can participate.

The do-it-yourself checklist

Develop a list of investment criteria to evaluate potential opportunities. These criteria set the foundation for finding the kind of property you believe will have longevity and be successful over the long run.

SPIRE’s investment criteria include:

  • property type and size
  • geographic location and size of market
  • cash flow
  • tenant mix and risk
  • projected rate of return (detailed 10-year, year-by-year projections)
  • age of buildings and construction details
  • neighborhood influence
  • suitability for longer-term hold

Assemble a team that can help to evaluate available properties. Have access to reliable consultants, advisors, and managers with real estate experience. SPIRE’s team typically includes lawyers, realtors, property managers, mortgage brokers, appraisers and engineers.

Put the property under contract, usually with a refundable “good faith” deposit while you conduct your evaluation of the property. Ideally you want to control the property while you complete your evaluation.

Complete your “due diligence” evaluation—which usually involves spending money. In conjunction with your key advisors and team members, know the right questions to ask. You want to evaluate:

  • environmental risks
  • condition of the building and associated services, including roof, structural, heating and ventilating systems
  • land use and zoning
  • legal and title issues
  • compliance with governmental authorities
  • neighborhood analysis, including competitive product and developments proposed for the area
  • lease reviews and tenant analysis; properly evaluate the credit worthiness of the tenant(s) and viability of their business
  • tenant improvement costs on renewal and releasing
  • leasing commissions and property management contracts
  • confirmation of value usually supported by an appraisal

Source the proper financing with an appropriate lender. Ensure you have the appropriate leverage and suitable terms that meet investment objectives for the property and on terms that are not overly burdensome on the borrower. Personal guarantees should be carefully considered. Also set up appropriate reserves for capital expenses, including ongoing repairs and maintenance.

Remove subject conditions once the due diligence is complete and you are ready to commit to the purchase with a non-refundable deposit.

Complete the purchase and either finalize the assumption of existing financing or conduct the placement of new financing.

Finalize post-closing details, including arranging for insurance (both on the property and for your own liability), appropriately transitioned to the new owner, and properly managed on an ongoing basis. Source appropriate property management and leasing agents to ensure the investment is properly maintained, kept fully leased, and is properly positioned in the marketplace over the longer term.

Historically, real estate has proven to be a significant portion of many wealthy investors’ portfolios, but investing like a Kennedy is no easy task. It might take more than your own capital base to start owning commercial properties, but privately owned real estate has the potential to reap generous rewards. Just remember: its price tag also comes with a need for hard work, sound judgment, and smart decisions.

The goal of this series has not been to dissuade you from entering the world of direct ownership real estate. We want to have put as much on the table as possible to set expectations and ensure that you understand everything involved in, for all intents and purposes, becoming a landlord.

Joe Kennedy and his family put massive amounts of time, effort and resources into their real estate investments to keep them cash flowing and relevant. If you have the desire to build a similar portfolio that may one day become an empire, then we hope these articles have given you the tools to take that important first step with a bit more confidence.

<< Read Part 3

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SPIRE LP is a real estate limited partnership offering its investors the ability to participate in increments smaller than the suggested $2-million by an individual or small consortium. SPIRE is managed by Nicola-Crosby Real Estate Investments Ltd.

David Sung is president of Nicola Wealth Management, a Vancouver-based investment management and financial planning firm. With 20 years of industry experience, David leads a team of dedicated and knowledgeable advisors, serving the needs of high net worth business owners, professionals, and their families.

Wayman Crosby is CEO of Nicola-Crosby Real Estate Investments Ltd. and oversees the management of SPIRE LP. A graduate of UBC in Urban Land Economics in 1978 Wayman has an extensive real estate career spanning over 25