subject to change. The applicability of these benefits can depend on specific circumstances, including the type of investment, your income level, and your tax filing status. Therefore, it’s always advisable to consult with a tax professional or financial advisor to understand how these tax advantages apply to your specific situation and to stay updated with tax laws. Evaluating the Performance of Passive Real Estate Investments Here are some tips for evaluating the performance of different passive real estate investments: • Analyze the total returns over time. This includes factors like rental income, appreciation, and costs. Compare historical returns across investments to see which has performed better in up and down markets. • Examine key metrics like occupancy rates, rent growth, and capitalization rates. Occupancy rates show the demand and rental health of a property. Rent growth indicates pricing power. Capitalization rates compare net operating income to property values. • Review funds from operations (FFO) if assessing REITs. This metric shows a REIT’s core operating cash flow from properties, analogous to earnings for stocks. A steady, growing FFO implies a healthy REIT. • Consider risk-adjusted returns, not just headline returns. An investment with 10% returns but high volatility may not be as good as 7% returns and low risk. Review risk factors like tenant concentration and management practices. • Compare fees charged across investments. Management fees, acquisition costs, profit splits, and other expenses vary significantly. Lower costs increase an investor’s share of returns over time.
91
Powered by FlippingBook