Introducing Loose Change

We’re excited to share some big news with you! 

Here at HappyNest, we want to help you achieve your financial goals. That’s why we have developed Loose Change, a tool designed to help you build your nest egg consistently and organically with your day-to-day purchases.

We know it can be hard to put aside chunks of cash into investing accounts. Loose Change allows you to contribute to your investment portfolio incrementally – a few pennies here, a nickel and dime there – over time. A little change in your growth strategy can add up to a big change in the long run. That’s especially true when it comes to building wealth. As the old saying goes: It’s not timing the market. It’s time in the market. 

Consistency and time are the no-so secret ingredients. Loose Change was developed to make contributing to your financial future easy, manageable, and methodical. 

How it works

As you go about your life, Loose Change will track your daily purchases and calculate the number of cents it would take to round up the total to the next nearest whole dollar.

For example, if you buy a coffee and your total comes out to $3.69, Loose Change tallies an additional $0.31 cents to bring that purchase amount up to $4.00 even. 

That $0.31 is called a Round Up. That $0.31 round up gets pooled with other round ups from the rest of your regular purchases. 

Every time your cumulative Round Ups reach $5.00 total, we’ll automatically deduct that amount from your linked bank account and invest it in your HappyNest account. Contributing to your financial future will be a built-in part of your daily life.

How to opt-in

Loose Change is only available to current HappyNest investors. In order to sign up for this feature, you will have to have an active account with HappyNest. 

You will also need the most up-to-date version of the HappyNest app. You can check that you have the latest version by going to your personal profile on your device’s App Store. If you have an older version, you’ll see a button that says ‘Update.’ (You know what to do.) 

Once you have the latest version, hop back into the HappyNest App and login to your account. 

At the top of your HappyNest home screen, you’ll see a banner that says ‘Try Round Ups for Free.’ 

Loose Change opt-in banner in HappyNest app

Click on that banner, and you’ll be directed to the Loose Change self-guided setup process. 

After agreeing to the terms and conditions, you’ll connect either a credit card or bank account through our partners at Plaid.

You can connect Loose Change to credit card, debit card, or bank account. Round-ups will only be tallied based on designated linked payment sources.

Tracking your Loose Change Round Ups 

Once you have connected a payment method to Loose Change, you will be able to view your purchase history and the resulting round ups in your HappyNest account. 

This activity log can be found on your HappyNest profile’s home screen. 

Loose Change Round up activity log in HappyNest app

Turbo charge your nest egg

Loose Change also offers a  multiplier feature on round ups for those who want to turbo charge their portfolio contribution activity.

You can access the multipliers feature by clicking on Account Settings on the Loose Change activity log screen.

There you’ll have the option to add a 2x, 5x, or 20x multiplier to your Round up contributions.

Try Loose Change for free

As a HappyNest investor, we invite you to try out Loose Change free of charge. We want you to see for yourself what a difference your Loose Change can make over time. 

This free trial is good for six months. After that, you can continue to use the feature for just $1 per month.

FAQs

Can I link more than one account/card to Loose Change?

Currently, Loose Change only supports one linked payment method. We recommend linking your most active account or card to maximize your regular spending activity’s impact on your investing portfolio. 

When I go to sign up, it shows Round Ups as ‘coming soon.’ Am I not eligible to sign up?

If you see ‘Coming soon’ in the opt-in banner on your home screen, you may have to log out of the app, turn off the ‘Remember me’ toggle on the login page, and sign in manually. 

Once you log back in, you should see “Let’s get started’ where ‘Coming soon’ appeared before. If you continue to see ‘Coming soon’ after logging out and logging back in, please reach out to us at info@myhappynest.com and we would be happy to assist. You can also send us a chat message.

Will Round Ups be charged to my linked credit card?

No. If you link a credit card as the purchase log on which to base your Round Ups, the actual drafts will still be deducted from the bank account you have linked to your primary HappyNest account. 

Bottom line

Making your money work for you is the key to financial success and independence. Loose Change is an easy and effortless way to grow your nest egg. Combined with other tools such as our auto-invest feature and dividend reinvestment option, you can manageably build your portfolio into a passive income producing machine. 

Download the HappyNest app:

HappyNest Real estate investing App apple store download icon for footer

HappyNest Real estate investing App Google Play store download icon for footer

7 advantages REITs have over owning investment properties

The advantages of REITs greatly outweigh those of owning investment properties.

Own an investment property, collect rent on it, let your equity stake appreciate over time, be someone’s landlord (‘landlord’ has a royal ring to it, doesn’t it?) – it all sounds great – on paper. 

But owning property comes with a lot of responsibility, hidden costs, and fine print catch-22s that most beginner landlords often don’t consider at the outset. 

These pitfalls can be expensive by many measures including time, money, and stress.

Enter REIT investing, where you get all the upside of real estate investing (and then some) while foregoing the drawbacks. 

Here are seven reasons REIT investing is a better alternative than buying investment properties. 

REIT Advantage 1: No mortgage required

Most of us don’t have a few hundred grand to drop on investment properties. That means in order to finance one, we need to get a mortgage. 

Mortgages aren’t cheap. 

A $350,000, 30-year mortgage with a 3% interest rate (doesn’t sound so bad, right?) will cost you over $180,000 in interest over the lifetime of the loan. That’s more than 30% of your capital – or ten years’ worth of mortgage payments – evaporating into thin air.

pizzanomics financing an investment rental property

By contrast, every dollar you put into a REIT boosts your equity stake and dividend payout. 

REITs sometimes finance properties when they acquire them, but usually only if it’s strategic in optimizing returns. 

Oftentimes, they have enough capital to buy the property outright, saving hundreds of thousands in mortgage interest rate costs. 

As a REIT investor, those savings get passed right on back to you. 

REIT Advantage 2: Shorter path to profitability

It might seem like as long as you have a tenant whose monthly rent is higher than your mortgage payment, you’re in the green. 

That’s only partially true. 

The rent on your investment property needs to not only cover your mortgage payment, but also costs of home insurance, HOA fees, property taxes, possibly water and trash, maintenance (which can be an unwelcome dark horse), and property management fees if you’re not managing the property yourself. 

But, maybe you’re a P&L expert who can successfully calibrate your rental rate just right. Every month, you effectively cover both the mortgage payment, and all the side expenses, without interruption.

In these ideal circumstances, your first truly ‘in the black’ profit will be when your mortgage is paid off. 

The average mortgage term in the U.S. is 30 years – 15 if you’re on the fast track. If you start today, and everything goes swimmingly, 2051 will be a great year. 

If things don’t go perfectly for 30 years straight, maybe 2055 will be a great year? Time will tell. 

As a wise woman once said: “Ain’t nobody got time for that.”

Say you were considering buying an investment property for $350,000. You’d need $70,000 for the down payment, plus a few thousand for other closing costs. You are now the proud owner of a mortgage, and just 29 years and 364 days away from profitability. 

Alternatively, you could invest that capital into a REIT like HappyNest and at current rates, make approximately $1,575 return per quarter, starting about three months from now.  That’s 29 years and 275 days sooner than buying an investment property.

REIT Advantage 3: Passive income

If a landlord receives rent payment but immediately hands it over to the bank, was the payment ever really income at all?

It’s a head-scratcher. Luckily, you can avoid this conundrum by investing in REITs instead.

Most REITs pay out dividends monthly or quarterly. Instead of that $350,000 property you were considering, you could instead invest the would-be downpayment and start collecting a $1,125 dividend every quarter. 

Best of all, no need to turn right around and give it to your mortgage holder – because there isn’t one. That money is free to tuck away for retirement or go to Vegas and put it all on red at the roulette table. 

Alternatively, you can reinvest that dividend and witness the wealth-building

magic of what Albert Einstein once called the ‘8th Wonder of the World’: Compound interest. 

einstein

You see, if you practice delayed gratification, you could add that $1,100+ to your nest egg so that your next quarterly dividend payment would be approximately $1,200. Keep that going for a couple years and you’ll get yourself a nice little egg going.

Personal finances are dynamic – your needs can change over time. 

With a financed, private investment property, your mortgage needs to get paid whether or not your primary residence needs a new roof. 

But you can elect to have REIT dividends deposited directly into your bank account to help cover unexpected expenses, then go back to reinvesting as your financial situation stabilizes. 

It’s passive income at its finest. 

REIT Advantage #4: Liquidity

There comes a time in every investor’s journey in which they’ve reached their financial goals (or need the money) and are ready to cash out.

As the owner of a private investment property, there are some hoops to jump through to make that happen. 

water-droplet-fast-fresh

The real estate market conditions are a variable – no one wants to sell in a downturn. You’ll probably have to shell out a percentage to a realtor, possibly fund buyer contingencies, and pay for a lawyer to review documentation (who aren’t exactly known for their thrifty rates). 

With a REIT investment, that’s not the case. If you’re invested in a public REIT, you could have the funds in your account in a matter of days. (But consider the pros and cons of investing in a publicly-traded REIT in current market conditions). 

Withdrawals from a private REIT usually take longer compared to publicly traded REITs and generally require a written request. 

Still – no realtors, lawyers, or contingencies required, all of which eat into your profits. 

REIT Advantage 5: Access to better resources

How does a Sunday morning call about a broken toilet sound? You shelled out $150 for it last week, but the guy you hired didn’t do the job right and now he’s not answering. You’re going to have to hire someone else. 

Your tenant is laid off from their job and has to break the lease four months earlier than expected. Can you go a few months without their rent? Do you have the time to find a new tenant? 

Someone slipped and fell on your property. They’re suing you. Hopefully, the attorney you paid for out of pocket can get the settlement down to below your insurance policy’s liability limits. 

If the above scenarios sound like something you’d enjoy, then private ownership of real estate investment property is for you. Or you could outsource these responsibilities to someone else – but of course, it’ll cost you. 

Any of the above scenarios could fall onto your plate, and more often than not, will do so unexpectedly.

If that doesn’t sound like a good time, you might be a ‘hands-off landlord. And REITs are a hands-off landlord’s dream come true. 

That’s because REITs allocate a portion of their funds to handling these situations.

Additionally, because of their scale, they often have access to better contractors, lawyers, realtors, accountants, and property management companies. Tenants won’t even know your name, let alone phone numbers – every hands-off landlord’s dream come true. 

REIT Advantage #6: Access to otherwise out-of-reach investment properties

In addition to saving you time, REITs provide the opportunity to invest in properties that are completely out of reach for the 99.9%. That includes apartment buildings, commercial real estate, and industrial properties. 

These kinds of properties often have a higher return on capital than your garden variety rental property. But the cost of entry is prohibitive to most individual investors. 

Because REITs pool capital from many investors, they are able to add these investment jewels to their portfolios. Shareholders get to reap the benefits of high return on investment properties that would have been out of reach. 

REIT Advantage #7: Invest as much – or as little – as you want

In addition to the responsibilities and liabilities that come with being a landlord, buying an investment property privately is a huge financial commitment. 

Whether buying the property with cash or by financing it, buyers commit to the property’s sales price – and then some. 

REITs offer investors flexibility in terms of how much of their capital they want to commit to investing. HappyNest, for example, lets investors get started for as little as $10. That’s less intimidating than committing to hundreds of thousands, if not millions of dollars. 

Investors can add one-time boosts to their nest eggs, or skip adding to their principles if financial challenges come up. Mortgages and tenants aren’t quite so flexible. 

That makes REITs an attractive investment for smaller-scale investors who may have some disposable income to invest, but aren’t trying to make huge financial commitments. 

Investing in the right REIT

For all the time, money, and commitment REIT investing saves, return on investment is a direct function of the performance of the properties in its portfolio and its management. 

Don’t skip your due diligence: Check out the REITs portfolio properties, lease terms, and tenants, and consider their long-term prospects. 

HappyNest, for example, has two commercial properties and tenants with 8- to 10-year commitments. That means rental income is unlikely to be interrupted.

Even if the tenants break the lease early, there would be an advance notice to find a new tenant and avoid income interruption.

The good news is, once you find the right REIT, growing your nest egg becomes fairly hands-off. 

All the glory, none of the work. 

Meanwhile, back on Earth, Jeff Bezos wants to be your landlord

Jeff Bezos just can’t get enough. 

The king of e-commerce has partnered with Salesforce CEO Marc Benioff in the Space Race. There is formidable competition. Virgin Galactic founder Richard Branson, already a legend in air travel, has his own space ambitions, as does Tesla Founder and CEO, Elon Musk.

But back at mission control, Bezos is moving in on a neighborhood near you. 

Fintech enters the housing market

Arrived Homes is the latest fintech app that aims to remove obstacles between individual investors and wealth-building opportunities. 

At first glance, Arrived Homes seems like it’s lowering the barrier of entry to the real estate market. This will ring like a siren call to Millennials and Gen Z, already significantly behind where the Boomers were at this stage in their lives by measure of property ownership. 

But things aren’t always what they seem. Peeling back just one layer reveals that Arrived Homes could lock Millennials and Gen Z out of homeownership for good. 

Moving the goalposts

The cost of housing in the United States is primarily a function of supply and demand. As Millennials pay off student loans and negotiate salaries that resemble progress on paper, the cost of homes is always one step ahead. The price tag is always increasing a little faster, always just out of reach

FRED data on median home proce
Data source: FRED St. Louis

Raises and promotions never seem to keep pace with the rising cost of living, creating a confusing life conundrum that has resulted in postponement of marriage and a free fall in birth rates.

Millennials are now in their late 20s and their 30s, and Gen Z is on the shores of adulthood. Both cohorts rightfully want their share of the proverbial pie. 

Supply and demand, demand, demand

The pandemic brought on a Millennial wave of Urban Flight, as lockdowns made city dwellers realize just how small their living spaces really were. The influx of buyers in the already-tight liquidity market has led to home sales closing over asking prices by double digit percentages. According to Redfin, 70% of buyers faced bidding wars in May of 2021 – up from 52% of buyers in May 2020.

home buyers got in bidding war stat
Source: Redfin

Juxtapose that against a market whose supply stock has been stunted by city ordinances and permits, largely reserved for large developers with deep pockets. Not-so coincidently, those same developers also happen to be the benefactors of the housing subscription model

Another sneaky force adding pressure in the mix is the rise of AirBnB. The short-term rental app took even more housing chips off the table. Its platform further incentivized the mindset that houses are investment assets to capitalize on – not homes that people need to live in. 

These pressurized dynamics were already driving double digit ‘appreciation’ in real estate. According to a June S&P Global report, the U.S. housing market gained 14.6% in value year over year between April 2020–2021. At time of press, that trend is showing no sign of slowing.

Changing lenses

The real estate market’s ‘appreciation’ percentage gain is one way to present the fact that renting Millennials and Gen Z are now 14.6% further behind the American Dream, which for our intents and purposes here, starts with owning a home. It also loosely translates to “rent is probably going up soon.” 

That makes for two demand-side pressures contributing to the price increase in the housing market, while the supply side has remained stagnant. How will we solve this problem?

One solution that definitely won’t work: Jeff Bezos’ latest project, Arrived Homes. Presumably, it’s about to throw gasoline on an already overheated market.

Jeff Bezos is a man of profound talents. But great talent can be applied to bad visions with harmful ramifications. Indeed, misguided ambition can amplify the fallout of a small-context vision. 

American Dream for sale

Arrived Homes will accelerate the transformation of the American Dream into an ‘investment class’ that appreciates. That’s a big change from its place as a milestone of “making it,” and symbolism of freedom and independence.

The housing market’s assetization is reminiscent of the successful conversion of higher education into an investment, which learned everything it knew from the capitalization of health care.

Arrived Homes creates an access point for investment capital to flow into the pressure cooker that is the American housing market. It creates more demand without a corresponding supply expansion. You don’t need a finance degree to understand that when demand exceeds supply, prices will continue their exponential climb. 

Getting buy in

As material wealth continues to consolidate into fewer hands, young adults will continue to find themselves in perpetual debt without ever owning anything. 

world economic forum, you'll own nothing and you'll be happy
Still from World Economic forum YouTube channel for editorial commentary purposes

 In fact, the World Economic Forum came right out with recommendations to get comfortable with the idea of perpetual serfdom. What a message. But don’t worry: We’ll be happy. The economists at the World Economic Forum, who are much smarter than us, said so. Apparently, their cum laude is supposed to mean we’ll believe anything they say is true. 

Intentionally or not, Arrived Homes deceptively positions itself as granting access to a market that it is actually shutting people out of. Americans don’t need partial ownership in rental properties: They need a primary residence. The number of renters officially eclipsed the number of homeowners in 2018, and the divide has been growing ever since.

The math isn’t hard: Every property added to Arrived Homes’ portfolio is one house’s status going from owned to rented.

Collective commercial real estate investing

But it doesn’t have to be this way. HappyNest is a collective investing, real estate fintech app that, first of all, arrived to the market before Arrived Homes did. Our platform gives real people access to a market they never could realistically consider – the literal inverse dynamic that Arrive Homes creates.

HappyNest seeks to help people grow their primary nest egg, by opening doors to wealth-generation opportunities without slamming the doors on other future prospects. That’s because HappyNest’s investment portfolio consists of commercial and industrial properties, a lucrative asset class that has historically only been available to the wealthy and connected. 

But by pooling capital from real people, we can cultivate access to possibilities we couldn’t accomplish individually. By teaming up with HappyNest, investors aren’t indirectly driving up living costs and minimizing their homeownership prospects in the future.

Jeff Bezos’ next move

Wouldn’t it be wonderful if Jeff Bezos instead applied his incredible gifts and talents to something that enriched communities, not just board members? The man has the world at his fingertips – any further personal wealth accumulation at the expense of others is no longer ethically justifiable by ambition alone. It’s hard to imagine there would be a tremendous change in his living standard compared to what he’s established after his first few hundred billion. 

We already know Jeff Bezos can accomplish whatever he sets his mind to, for better or for worse. Who will be impressed if he makes another successful business? At this point, it’d be more surprising if he didn’t. Any more wins in this arena are expected –  boring, even.

Dramatic Crossroads Yu-Gi-Oh Card by AlanMac95 on DeviantArt
Dramatic Crossroads Yu-Gi-Oh Card by AlanMac95 on DeviantArt

Perhaps Bezos should consider expanding his definition of value and worth. He could challenge himself to look beyond dollars, patents, property, and copyrights. He could focus on drawing up the blueprint for more conscious capitalism – one that is focused on ‘win-win’ as opposed to ‘win-more.’ 

Can Bezos sell the vision of a cleaner, more equitable world? Could he work out the operational inefficiencies in energy production and consumption? Can he set up the infrastructure for every American to get quality health care with Prime-level speed? How about cut the cost of lifesaving products like insulin while still maintaining enough margin to support a healthy business? 

Can he change gears now, from building an empire, to investing in a legacy?

We hope we live to see it. If Jeff Bezos were to pursue a venture like that – we’d buy the first share. 

Thinking two steps ahead

But with this next venture – Arrived Homes – the answer appears to be ‘not for now’.

Perhaps the allure of becoming the world’s first trillionaire is something he simply cannot resist. It almost seems that the biggest weakness of the world’s most successful man is one most of us can relate to in some way or another – our own egos

Once he’s conquered the real estate market to his liking, he might still have time to achieve his greatest feat yet – merging aptitude with empathy, while Millennials and Generation Z sort through the damage his monumental success has inflicted upon their lives. 

Until then, we invite you to think not just one, but two steps ahead in your investing journey. Together, we can get our share of the American Dream, too.  

And some things are worth fighting for.

3 reasons why private REITs are strategic hedges against volatility

Despite the wild ride investors of all kinds have been on this year, their portfolios were almost certainly hit with volatility.

Change is afoot; uncertainty lingers. 

Long-standing investment wisdom holds that markets do not like uncertainty.

The best we can do to manage risk under murky conditions is minimize the variables that contribute to volatility. 

But after an IPO, publicly traded REITs become subject to numerous irrelevant or amplifying market factors that do quite the opposite. Many of those dynamics have little to do with the performance of the REIT’s portfolio value or management.

Here are three reasons why private REITs are an attractive alternative investment to hedge your portfolio against volatility.

They aren’t in ETFs

A well-run, private REIT’s share price is a truer reflection of value than many publicly traded investments.

Consider this: According to ETFGI, an independent market research and consulting firm, the number of publicly traded ETFs has gone up more than seventeen-fold since 2005. 

At the same time, the number of companies listed on the stock market has been on the decline.

 

 

The result? The stock price of publicly traded securities is becoming increasingly tied with the performance of the overall U.S. economy – and less reflective of the underlying assets performance.

The value of the investment asset is now intrinsically tied to the performance of all the companies in the fund. That may include competitors or even completely unrelated industries. 

There are 20 publicly traded ETFs that are combinations of various REITs.

If one asset in the ETF dives, the value of all assets take a hit. The more ETF exposure, the more amplified the influence of groupings becomes on share value.

You know what they say: The company you keep. 

HappyNest’s portfolio

By contrast, a private REIT’s share value is primarily a function of real estate appreciation and property management performance. 

That has proven to be a blessing for HappyNest’s portfolio. 

The tides of the last 12–18 months have hit various real estate sectors asymmetrically. 

Some sectors thrived: The demand for industrial properties, such as HappyNest’s shipping fulfillment center in Fremont, IN, grew substantially as major retailers dialed up their e-commerce capacity.

Meanwhile, large sections of the workforce were sent to work from home. Skyscrapers and office buildings across the country became ghost towns

How quickly the demand for office space and other hard-hit sectors will rebound remains to be seen.

Had HappyNest been grouped with an office space REIT in an ETF, its share value would have been impacted by office sector decline. That is despite the fact that HappyNest has no office space real estate in its portfolio. 

They aren’t shortable

Speaking of market forces that distort true value: Recent activity in GameStop’s stock price revealed that many players in the publicly traded markets aren’t always gunning for share value to grow. 

GameStop is lucky – they were given a second wind by retail investors. 

But hundreds, if not thousands of other publicly traded, struggling businesses have not (and will not) be given a second chance.

When hard times hit, the last thing any organization needs is numerous parties betting on their failure. 

Last year, as retailers across the country were forced to shut down, retail REITs faced many challenges. Vacancies mounted, decreasing revenue.  Property values themselves also took a hit as shutdown uncertainty cooled demand.

To make things harder, short interest in retail REITs skyrocketed. Tanger Factory Outlets for example, has over 30% short interest as of February 12th, 2020. That only adds anvils to already-heavy challenges.  

In current market conditions, Tanger Factory Outlets would likely be better off as a private REIT. Were that true, they would be insulated from the downward market pressure of short sellers simply because, well, their shares wouldn’t be shortable. 

No day trading

One publicly traded share can be, and often is, traded numerous times a day. Day traders and algorithms are the arbitragers of investing.

They have little to no interest in the long-term success of an underlying company. For them, it’s not really an investment – it’s a trade. 

In fact, short-term traders are generally quite agnostic about what they’re investing in (especially the algorithms). 

Their strategy is to capitalize on short-term price action. That’s it. 

They jump in for a few hours, maybe a few days, and leave.

This ebb and flow of day trader capital in an investment pretty much only brings volatility to the share price, blurring the true value of an asset. 

The rise of commission-free and independent traders has increased the ranks of these kinds of traders substantially.

This type of activity is, for the most part, a non issue in private REITs. 

When investors buy shares in private REITs, they generally intend to hodl it for the long term. 

Shorting, ETF groupings, and day trading are all volatility variables that are not factors when investing in private REITs. 

The result is a steady investment foundation on which to determine the best possible strategy to optimize shareholder return without fear of unexpected liquidity issues.   

HappyNest’s portfolio is poised for steady growth

While some real estate sectors have hit rough times, others have experienced tremendous growth. HappyNest’s portfolio been on the right side of that line and has a bullish outlook.

All of HappyNest’s portfolio properties have active, 8-10 year rental agreements with major organizations such as FedEx, AutoZone, and CVS.

Given the balance sheet of these organizations, we expect our revenue flow (i.e.: rent) to remain steady as well as the value of our properties to continue to appreciate.

Everyone has to decide their own investing strategy risk tolerance. 

But no matter your investing style, having a steady and reliable investment in these volatile times not only brings ROI (and passive income), but also peace of mind.

And it’s hard to put a price on that. 

Everything You Need to Know About Investing in REITs

Looking to hedge your yolos with some investments that would make the likes of Warren Buffett and Charlie Munger proud?

We could all use a nice anchor in our portfolio to hedge against volatility.

REITs have consistently ranked among the highest return investments over time, which is why they have been an investor favorite for decades.

Real estate is a historically high-performing investment

4-of-5-wealthy-from-real-estate---buildings

In fact, over the last 30 years across ten different investment classes, REITs have taken the

#1 spot for highest returns eight times – more than any other asset class. For those years that they didn’t snag the #1 spot, they ranked second or third an additional six times.

This year proved to be a rough one for REITs, closing out at a net loss. But smart money knows that a down year can also be a prime entry point. After all, the goal is to buy low, sell high.

For the capitalist who sees the opportunity where others see obstacles, here’s the 360 on all things REIT.

What is a REIT?

REIT is an acronym for Real Estate Investment Trust.

In a nutshell, they are companies that pool investor capital to invest in real estate or real estate products. The gains on these investments are in turn distributed among shareholders.

REITs were defined and passed by Congress in 1960 under the Cigar Excise Tax Extension.

The idea was to give average Americans – who might not have the means to buy more than one property – the opportunity to take part in and enjoy the fairly consistent gains from real estate investments.

The act outlined requirements to qualify as a REIT under law. REITs are incentivized to meet these conditions through tax advantages. The big fish reward is that the company does not have to pay corporate taxes if they meet REIT qualifications.

REIT Qualifications

No corporation wants to pass up tax breaks. They’d rather hit these key numbers than rendezvous with the IRS come springtime:

75%

Percent of total assets invested in real estate, cash or U.S. treasuries. Also the percent requirement of revenue generated from real estate-related income such as mortgage interest rates, rent on property, or profit on real estate sales

90%

Amount of taxable income that is paid out to shareholders – a nice perk for investors, courtesy of Uncle Sam. HappyNest intends to pay out 100% of its net income to shareholders.

50%

The maximum amount of shares that can be held by 5 people or less. Coupled with this requirement is that within the first year of an REITs formation, it must have at least 100 investors in the pool.

3 Trillion

Estimated total value of assets currently held by REITs.

The Benefits Of Investing In REITs

1. Regular returns

Unlike many investments, investing in REITs typically produces regular income in the form of dividends generated from rent or mortgage interest payments.

2. Investing in REITs is accessible to the average person

While it would be great to be in a financial position to buy numerous properties and collect rent monthly, for most people, that’s simply not financially feasible.

REITs offer the ability to participate in real estate investing without having hundreds of thousands of dollars at the ready. With real estate investment apps like HappyNest, for example, investors can buy in with as little as $10.

3. Liquidity

Compared to traditional real estate investment property, buying into and selling out of most REITs is easier and more streamlined and requires a lot less paperwork.

4. Hands-free management

Ask any landlord and they’ll tell you – managing properties is a lot of work. Between filling vacancies, managing tenant requests and complaints, and building maintenance, a lot of time and money can go into the administrative side of real estate.

REITs handle the operational side of real estate investments, so investors can skip the 3 a.m. calls about plumbing issue emergencies.

REIT Taxonomy

Although it may seem difficult to understand all there is to know about investing in REITs, let’s start with the basic building blocks.

Remember in biology class when your teacher covered taxonomy trees? You know, kingdom, phylum, class, order, family, genus, species, etc.?

No? Okay, well, pay attention this time – there’s money on the line.

There are several categories…of categories…of REITs. Very meta, we know.

To make things a bit more digestible, it might help to start with a visualization, then get into the nitty-gritty.

If REITs were a taxonomy hierarchy, they’d look something like this:

REIT Taxonomy

Every REIT has a ‘class,’ ‘order,’ and ‘family’ component.

For example: American Tower Corp is a publicly-traded (class), equity-based (order) REIT that primarily manages telecommunication infrastructure sites (family) around the world.

 

Breaking Down The REIT Taxonomy Hierarchy

Class: Investment acquisition strategy

REITs can be categorized by how they accrue capital for different forms of real estate investing.

They fall into three main categories: Publicly traded, public non-traded, and private.

Publicly traded

Publicly traded REITs trade on stock exchanges like the NYSE. Anyone can buy a slice of a real estate portfolio whenever they want.

Pros Cons
  • High degree of transparency
  • Registered with the SEC
  • Ability to generate a high amount of investment capital quickly
  • Easy to buy and sell (highly liquid)
  • Able to be grouped into ETFs. This means the value of the REIT’s share can be affected by the performance of other REITs and sectors as opposed to solely on the performance of the underlying portfolio.E.g.: If a REIT has a strong year but is grouped with low-performing REITs in ETFs, the REIT’s performance will be adversely impacted.

Public, non-traded

An REIT can be public without being traded on a stock exchange like the NYSE.

HappyNest falls into this category. Though anyone can buy shares of our portfolio of properties, the shares are not listed on the NYSE or anywhere else. We see this as an advantage – and 2020’s bottom lines back us up.

This year, the value of the properties in our portfolio appreciated. But not every sector of the real estate market was quite so lucky.

Had our REIT been publicly traded on exchanges, it’s likely it would have been grouped into other REIT ETFs. Because of this grouping, our returns would have been smaller. It’s the stock market equivalent of “guilty by association.”

Instead, our performance is tied directly to and only influenced by the appreciation of the properties in our portfolio, all of which gained this year.

Pros Cons
  • Registered with the SEC
  • Performance of investment tied to underlying asset value alone – insulated from swings in the market at large
  • Ability to quickly raise capital from investors since anyone can buy in
  • Not bought and sold as quickly (less liquid)
  • Less transparent, harder to tell share value
  • Fees
    *(HappyNest does not charge for broker commission of platform fees)
  • Information provided to the SEC may not be independently verified

Private REITs

Private REITs are not listed on exchanges and not offered to the public. As the name implies – they aren’t open to everyone.

Private REITs are not required to register with nor report to the SEC. More often than not, they are only offered to “accredited” investors, otherwise known as very wealthy people that can take the kinds of financial gambles and hits that would put the rest of us on the streets.

Though private REITs have produced higher returns than publicly traded ones, they come with significant risk. Without an SEC registration, there is little to no oversight on their performance and operations. That makes these kinds of REITs particularly susceptible to fraud.

Management fees can be high and unsubstantiated. Investors must put their full trust into the board of trustees.

Pros Cons
  • Potentially higher returns compared to traded REITs
  • Partially insulated from stock market fluctuations
  • Lack of transparency
  • Must be “accredited” investor
    *net worth of $1 million, not including primary residence or income of $200K+
  • Not registered with the SEC
  • High management fees
  • Can require long holding periods (low liquidity)

Class: Type Of Asset Managed

The ‘class,’ (in our REIT taxonomy hierarchy) is the type of real estate assets managed by that REIT. These primarily fall into two categories:

  • Equity

    An equity ‘class’ REIT owns real estate investment properties. The REIT manages, buys and sells, or collects rent from those properties.

    They generate income and profits via market appreciation of their assets. That could include things like rent payments from properties they own outright or a rent payment that exceeds their own mortgage payment on that property.

    For example: An REIT buys a property for $100,000. Their mortgage payment is $1,500 a month. They are able to rent it out for $2,000 a month. That $500, minus overhead expenses, is profit for the REIT – 90% of which must be paid back to shareholders by law.

  • Mortgage-based

    Mortgage-based REITs provide capital to borrowers much like a bank does. They generated returns via interest paid by the borrower during repayment.

Unlike the ‘order’ (investment acquisition strategy) which is either/or, asset types can be diversified within an REIT.

Two Harbors Investment Corp, for example, engages in both mortgage-backed securities as well as owns a portfolio of properties. Its income is generated by a combination of rent, asset appreciation, and interest paid on mortgages it holds.

Family: Real Estate Sectors

Lastly, within the real estate market, there are sectors.

Examples of real estate sectors include:

  • Residential
  • Commercial
  • Retail
  • Industrial
  • Healthcare facilities
  • Data centers
  • Telecommunications infrastructure

The sector in which a REIT operates can have a huge impact on the bottom line, and the performance of each sector can vary year over year.

A retrospect of 2020 demonstrates just that. As millions of workers across the world were sent to work from home, office buildings and retail storefront worldwide stood empty as leases lapsed and were not renewed.

As a result, office REIT’s year ended with a net loss of almost 20%. Around this time last year, office REIT investors were celebrating 30%+ returns.

Meanwhile, e-commerce demand skyrocketed. In May of this year, even fast shipping MVP Amazon had to remove non-essential items from its 2-day prime delivery schedules.

All that demand meant the need for shipping fulfillment centers, part of the industrial sector, increased significantly. HappyNest has an industrial property in its portfolio, currently leased by shipping logistics company FedEx, that is enjoying this appreciation.

Property-Cards-Gold happynest properties in ints real estate investing portfolios
Properties in HappyNest’s real estate investing portfolio

Choosing The Right REIT For Your Investment

At the end of the day, every investor wants to protect the value of their investment and gain a little alpha along the way.

Though 2020 wasn’t the best year for REITs as a whole, some sectors thrived. Even for those that didn’t, as the old saying goes: Buy low, sell high. The dip in performance could prove to be a great entry point. REITs have historically outperformed stocks and other asset classes consistently.

Successful REIT investments are often the product of accurate predictions of what comes next.

HappyNest remains confident in its portfolio of properties’ ability to weather – and even thrive – in the upcoming year. Are you ready to start investing in REITs?

How HappyNest is Changing Commercial Real Estate Investing for All

HappyNest helps you invest confidently in real estate leased to some of the world’s most successful companies.

HappyNest is a mobile-ready real estate investment tool, the first real estate micro-investing platform. Given that commercial real estate assets have outperformed the stock market for decades, HappyNest helps investors gain access to this lucrative market.

Many other private REITs that are active in this market require high minimum deposits. HappyNest eliminates this barrier of entry by allowing anyone to enter the market for as little as $10.

Investing in Commercial Real Estate

Commercial real estate is a lucrative investment class.

However, most traditional real estate investments require a down payment or a lump sum to start a portfolio. Purchasing an apartment building or commercial property that generates a capital rate of return is a sound investment strategy, but beyond the financial capacity of many younger investors.

Partnering in a Real Estate Investment Trust (REIT) is another traditional model, but most of those also require large sums of money to get started.

What is HappyNest?

HappyNest is a real estate investment app that is easy, safe and affordable way to get start investing in real estate.

The system is fully automatic, thereby cutting the costs of real estate investing.

In the past, only those able to purchase an investment property alone could benefit from real estate. Traditional real estate investments require a down payment or a lump sum to start a portfolio, but that makes it difficult for young or new investors.

With HappyNest, you can become a real estate investor with a low buy-in amount of just $10. It is the lowest minimum investment of any real estate investing platform on the market.

Our portfolio features a massive shipping distribution center on an active 10-year lease with FedEx, and a commercial retail location currently on an 8-year lease with CVS.

As a shareholder, you become a partial landlord to these great American companies. You will collect rent on a quarterly basis in the form of dividends. Your share value will grow as the real estate market appreciates.

HappyNest uses a goal-based investment strategy to help its users achieve their financial dreams.

How does HappyNest work?

HappyNest brings commercial real estate investing services to everyone with just a touch of the phone.

Users can invest their spare change in real estate and see the tangible assets in which they are investing. The site is safe and secure with 256-bit encryption. Our easy-to-read blog provides useful explanations of investment strategies, allowing users to invest in premier commercial real estate for just a few dollars at a time.

How to get started real estate investing with HappyNest

Visit www.myhappynest.com and sign up for early access. The app is accessible with any smartphone.

Start on your journey to financial success. Set realistic savings goals, choose the amount you want to invest, and start growing your nest egg.

 

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