Investment Articles

Investors looking to diversify their portfolios and insure their wealth against the ravages of volatility in traditional markets, will most likely have come across a range forestry investments, promising to generate superior inflation-adjusted and risk-adjusted returns for the long-term investor.

But how have timber investments performed? And how does the smaller investor participate in this interesting alternative investment asset class?

Firstly let’s look at the past performance of forestry investments, as measured by one of the main timber investment indices, the NCREIF Timberland Index; according to this basic measure of investment returns in the sector, this asset class outperformed the S&P500 by some 37 per cent in the 20 years between 1987 and 2007. When stocks delivered average annual returns of 11.5 per cent, forestry investments returned 15.8 per cent.

At the same time, returns from investing in timberland and woodlands have been proven to display a much lower volatility, an attractive characteristic for today’s investor.

Previously, the majority of investment returns from forestry investments have been mopped up by larger, institutional investors such as pension funds, insurance companies and university endowments, who have collectively placed over $40 billion into timber investments in the past decade.

So on to the second question; how do smaller investors participate in this kind of alternative investment?

According to a study by Professor John Caulfield of the University of Georgia, returns from forestry investments are three-fold;

An increase in timber volume (biological growth of trees), which accounts for some 61 per cent of return on investment.
Land price appreciation, accounting for only 6 per cent of future returns.
Increase in timber prices per unit, delivering the final 33 per cent of investment returns for timber land owners.

So the best way to harness the performance of timber investments is to take ownership of trees, either directly, or through one of the array of forestry investment funds or other structures.

Timber REITs

One way for smaller investor to participate in timber investments is through a Real Estate Investment Trust (REIT). These investment structures are like funds, in that investors can buy and sell shares in the trust on an exchange, the REIT acquires and manages timber investment properties, but unlike normal companies must pay out 90 per cent of their earnings to investors through dividends.

Some examples of Timber REITs are:

Plum Creek Timber is the largest private owner of timberland in the U.S. and the largest timber REIT with a market cap of about $5.6 billion, many investors have chosen this as their route into forestry investments.

Potlatch is also a timber investment REIT while

Rayonier generates about a 30 per cent of its REIT earnings from timber.

Weyerhaeuser has disposed of its paper and packaging businesses and will convert to a REIT by year end.

The Wells Timberland REIT is not publicly listed but may be available for purchase through Wells Real Estate Funds.

Another way for smaller investors to add forestry investments to their portfolios is to buy Exchange Traded Funds that attempt to track the performance of timber returns. This is less direct than owing timberland, or investing in a timber REIT, as the ETF may also invest in shares in companies involved in the timber supply chain including processors and distributors. This means that investing in forestry through ETFs exposes the investor to some of the volatility of equity markets.

The Guggenheim Timber ETF owns about 25 stocks and REITs involved in the global timber and paper products industry with a 30% weighting to U.S. companies.

The S&P Global Timber & Forestry Index Fund holds 23 securities and is 47 per cent invested in the U.S.

Timber Investment Management Organisations (TIMO)

Those with more capital to spare can participate in forestry investments through TIMOs, although the majority of these investment specialists require a minimum investment of $1 million to $5 million and a commitment to tie up funds for up to 15 years. TIMOs essentially trade timber land assets, acquiring suitable properties, managing them to maximise returns for investors, the disposing of them and distributing profits to shareholders.

Many experts believe that the active management style of TIMOs ensures that they can be more reactive to market conditions than REITs, and therefore don’t tend to fall and rise in line with the market quite as much.

Direct Forestry Investments

Those with access to sufficient capital and the appropriate expert advice can invest in physical properties. Commercial timber plantations are complex operations that require skill, knowledge and expertise to manage effectively and maximise returns whilst lowering risk.

For armchair investors, or those with less capital to spare, many companies offer investors the opportunity to purchase or lease a small portion or plot within a larger, professionally managed timber plantation. Investors normally take ownership of their plot and trees via leasehold, whilst the timber investment company plants, manages and often harvest the trees on behalf of the investor.

Options for investors range from species to species and region to region, with current opportunities in Brazil, Panama, Costa Rica, Germany, Nicaragua and other, more exotic locations like Fiji.

Investors should be wary as many of these direct forestry investments are frontloaded with enormous commissions for salesmen and promoters, with many offering ‘agents’ up to 30 per cent commission for the sale of plots to investors, and in many cases, no due diligence even exits.

In some cases, the Author has seen forestry investment plots in Brazil packaged and sold to investors for over £100,000 per hectare. Investor should seek advice from an independent consultant with experience of this alternative investment asset class, and who is able to present a complete suite of due diligence material, including an independent valuation of the forestry investment property on offer.

Summary

Investors choose forestry investments due to their effect as an inflation hedge, and their ability to generate non-correlated return on investment in the long-term.

Performance of the asset class is driven by demand for timber, weighed against global supplies, and in the long-term we are using timber at a faster pace than we can grow it, making timber investments an attractive asset class for the investor seeking stable, long-term capital appreciation within their investment portfolio.

Investors looking into which type of forestry investment is right for them should consult an adviser that can demonstrate experience and expertise within the sector.

DGC Asset Management Limited is an alternative investments business, identifying opportunities to invest in non-correlated assets.

David Garner is Partner DGC Asset Management Limited.

I have found that after several years of helping people purchase and manage investment properties that many investors still invest with their emotions. When it comes to building an investment property there is only one way really invest, with a cool, unbiased and rational mind. Stay detached from the process, and look at it as simply an investment, nothing more.

Let me give you an example. I advised a client years ago who wanted to get started on the residential property market. He was living in a more affluent suburb, and had a very good job that saw him earning in the upper 10-20 per cent of the population.

He had heard that investing in property was an excellent way to build future wealth, and was a secure investment. I advised him that he should buy land in the fringe of the city, and then proceed to build a new house. I explained to him that there would be minimal maintenance costs in a new property, and a new house will attract the best possible depreciation, giving the owner an advantage tax wise.

I further explained that a property in a new outer suburb will have a good chance of tenancy on an almost continual basis. The lower rental cost in these areas (commensurate with the cost of the property) meant that low to middle-income bracket families would always be willing to rent.

Unfortunately the investor disagreed with me. He argued that buying a property in his suburb, at a cost of around 4 times the cost of the house and land I was showing him, would return a much greater rental return. He did not factor in the higher mortgage cost that would be involved, nor the fact that the rental return in the suburb was actually much lower than in the outer suburb.

Worst of all though, he figured that the higher priced rental would mean that he would attract a much better calibre of client, who would care for his property, and afford him lower maintenance costs. This was an incorrect assumption for two reasons; firstly just because someone earns more money or can afford a higher rent does not make them a better person, or more likely to take good care of your property, and secondly, the existing property was older, and due to normal wear and tear, would have many more maintenance issues.

The investor went on to buy the more expensive property, and actually had trouble renting it out (the higher end market is much smaller), and at this point is looking to sell the property at a loss.

My suggestion, if one has the money to spend, would be to invest in three or four smaller priced properties. This is a much smarter path to wealth creation, and, in general, will see you much more satisfied as an investor.

The advantages of buying land in an outer suburb and building a house on it are then:

- You are adding value to the land, thereby creating wealth by actual work

- You can take advantage of tax breaks available as depreciation

- Often better rental return on this end of the market

- New equipment and fittings usually means less money to be spent on maintenance

- High demand from a larger market allows for better rental return and higher tenancy

- Finally, the lower cost per investment property allows for a sounder investment strategy of three to four properties instead of one higher priced property

If you follow the advice I have given you here you will have handled that first step of investing with a rational mind, instead of based on your emotions. Don’t buy an investment property based on where you would want to live, or based on if you like the area. Invest based on the area that will give you the best rental return, and will cost you the least in maintenance.

If you would like some further advice on this please do not hesitate to me at Dynamic8 Property Investment.

Anthony Peluso Residential Property Investment Consultant http://www.dynamic8property.com.au

With all that is happening in the U.S. and the world today, I thought I’d share the views of noted economist, A. Gary Shilling.

Shilling’s known for calling it as he sees it. In his most recent INSIGHT newsletter Shilling sounds a note of strong pessimism, but thankfully also gives us some direction on how to position our portfolio for what he sees as a sluggish economy ahead.

Economic View

Shilling believes the economy is going to get much worse from here on out. In fact, he is pretty sure we’re headed for another recession in 2012 and perhaps another decade of flat GDP growth. The reasons he cites are high unemployment and federal deficits here at home, regional conflicts abroad, and increasing global unrest.

Shilling also lists nine well-formulated reasons to support his pessimism, but we won’t go into that here. Suffice it to say that his reasons do hold some merit.

Shilling’s List – What To Sell

1. Sell U.S. Home Builders. Shilling believes this sector has over-binged, that home prices could still drop another 20%, and recommends selling home builder stocks if you own any.

2. Sell Realty Investments. He urges real-estate investors (Steve: such as some of my listeners that have second homes and investment properties) to get out now before prices drop further and you’re stuck in a market with no liquidity.

3. Sell U.S. Bank Stocks. Shilling thinks regulatory uncertainty, gridlock in Congress, and underwater mortgage loans will weigh heavily on bank stocks.

4. Sell Commodities. He believes commodity prices are bubbles that will soon pop because of sharply reduced demand in the weakened global economy he’s predicting. He also believes there’s far too much speculation in commodity prices that is removed from reality, and this cannot continue when fundamental demand drops.

5. Sell Emerging Markets’ Stocks. With low returns at home, U.S. and European money has driven up emerging markets’ stocks to unsustainable levels. He sees a correction coming as weak demand from U.S. and Europe grinds emerging economies to a stop, with China most at risk.

Okay – good to know and imbibe into our investment decision-making subconscious mind. Now let’s see what he wants us to buy.

Shilling’s List – What To Buy

1. Rental Apartments. Okay… so he’s negative on housing and thinks the American dream of homeownership has temporarily gone awry (Steve: remember – his thoughts, not mine) so he suggests investing in rental apartments because more Americans will be renting, on tighter budgets that favor apartments. (Steve: in the rest of the world, more people rent and live in apartments than own single-family homes.)

2. North American Energy. Very simply, with increasing conflicts in oil producing nations (many run by oppressive dictators or monarchs), America plans to reduce its dependence on foreign oil. And since America has a voracious appetite for energy, U.S. energy producers will do well over the long run.

3. Income-Producing Stocks. According to Shilling, the stock market’s gone nowhere over the past 12 years. So he recommends income stocks – utilities, drugs, telecom, preferred shares and the like. (Steve: I agree in that it’s important to have dividend stocks in your portfolio.)

4. Treasury Bonds. Despite all the naysayers, Shilling lays his trust in America. He thinks Treasurys will offer a safe-haven in what he sees as a coming deflationary storm.

5. The American Dollar. And he believes the American dollar will hold its value way better than most other currencies.

So, the good news here is that Shilling isn’t asking us to get out of stocks altogether. He’s just asking us to rebalance our portfolio to play it safe, should his forecast become reality.

Now remember, the list above only reflects one man’s views. So after you read this, please do not rush off to call your broker and execute these trades. Heed Shilling’s advice, talk to your financial advisor, and let your collective best judgment prevail.

If you want to act on nuggets of his advice that make sense for your portfolio then I suggest you use ETFs, futures or indexes that give you the upside while minimizing your downside.

Shilling paints a kind of worst-case scenario. In response, the best investors do not bury their heads in the sand but analyze such points of view – so they can ready themselves should calamity strike. The best also know that no one can predict with certainty what lies ahead. So they keep themselves informed but don’t get overly alarmed or influenced by any one.

So keep a balanced view and a cool head, and invest for the long run.

Visit http://onthemoneyradio.org for weekly commentary and money advice that covers the entire financial spectrum which also airs on my weekly radio show, “On The Money!”

Steven L. Pomeranz, CFP is a 29 year investment management veteran and host of “On The Money!” which airs on NPR station, WXEL in South Florida. He concentrates on serving high net-worth individuals and has been named one of the Top 100 Wealth Advisors 2007, by Worth magazine (October 2007 Issue), honoring America’s premier financial and wealth strategists.

For many people the thought of handing over their new investment to a property management company on the Gold Coast or anywhere else is just not something they are willing to do. “This is my property and I’m the only one who can look after it properly” they say. “Why should I go the expense of finding a property manager when I can do it all myself; after all, it’s not rocket science is it?

Every new investor probably has these conversations with themselves and their family and I have a lot of sympathy for this point of view.

The Gold Coast has a bad reputation for dishonest property hustlers that was earned in the 1980’s and 1990’s. Once a region gets a bad reputation it’s hard to shake off. When you consider these hustlers were offering to fly people to the Coast from Melbourne or Sydney, give them a tour of available investment properties, introduce them to lenders and solicitors, get their signature on the mortgage documents and fly them back home. And all of that on the same day! All of this took place within just a few hours and was a carefully orchestrated high pressure salesmanship routine.

Frequently these decisions to purchase Gold Coast properties resulted in financial hardship for the investor. Oftentimes the price of these properties was heavily inflated. The hapless victim of these practices did not have the time for careful due diligence, nor did they have the time to fully reflect on their decision or discuss with a partner or professional person back home.

Fortunately these days are over. The property market in Queensland is now as heavily regulated as the rest of Australia. Further, the market on the Gold Coast is a good 20% down on where it was 2 or 3 years ago and is now ripe for the picking according to many experienced property commentators.

If you are from out of town, you can safely leave your Gold Coast property investment in the hands of experienced property managers who know the coast like they know their back yard.

After all it makes sense to hand over the care of your property to someone whose only role is to make sure you are well looked after. Someone who can find you the right tenant, check references, screen applicants on the National Tenancy Database and find an emergency tradesman if you need one. These are not the sort of activities you can easily take care of if you live in another state.

Of course you could take care of your own property management on the Coast if you want. It’s up to you. For me, I’d rather get on with my own business. Remember the old saying. The lawyer who represents himself has a fool for a client.

Mal Rawlings together with his wife Tracy Rawlings are dedicated to property management on the Gold Coast, in Queensland Australia.

Property Management Gold Coast

Suggestions that NRAS (National Rental Affordability Scheme) budgets would be reduced have not eventuated and the scheme to subsidize owners of approved investment properties in Australia will remain fully funded in the 2011 Federal Budget announced by Treasurer Swan. This provides surety for real estate investors and developers who might hesitate to invest in an otherwise fragile property market.

One of the biggest fears investors in Australian Real Estate face is the impact of not having a tenant for a period of time to provide the necessary cash flow to maintain mortgage payments. The NRAS property subsidies are a way to protect your income that is unique to Australian Real Estate. The Swan Budget has ensured that investors will continue to get the government real estate subsidies for the ten year period originally announced.

The continued funding also means that developers can continue to invest in NRAS approved new developments knowing that there is a ready market for the homes they build. The government recognises that the NRAS funding benefits renters, investors and developers and provides jobs for the building industry.

A key feature of the NRAS (National Rental Affordability Scheme) for Australian Real Estate investors is the guaranteed tax free government payment each year. This amount of $9,140 is paid to investors each year in return for the owner accepting a lower level of rent from the tenants. What this amounts to is a guaranteed, tax free payment in return for giving up non-guaranteed taxable income. A no-brainer really.

This guaranteed government payment is unique to Australian Real estate investments and is in addition to one of the most generous tax incentive environments in the world. Real Estate investment in Australia is treated by the ATO as a business. That means that every expense related to your property investment is tax deductible, including travel to inspect your property and the building and any contents are also depreciated and the depreciation amount each year is also tax deductible.

The Australian Real Estate market has proved to be one of the most resilient in the world not only because of the ongoing government support but also because of the population demographics. Australia’s population is growing and moving. Moving because the baby boomers are looking for better retirement options and because of the huge demand for labour from the booming mining industry. Coincidentally both of these factors are driving population movement into Queensland which already has a shortage of housing compounded by the flood events this January which destroyed or severely damaged 1000’s of homes.

The cap on the number of properties to be subsidised remains and the cut off date for new investors has not been moved.

More information on NRAS property investments is available at http://www.nras-property.com.au

Two of the three states that have the highest return on investment for tax lien investing are not even tax lien states. They are the redeemable deed states Georgia and Texas. What makes them so attractive to lien investors are the high interest rates and shorter redemption periods.

In these states the interest rate is not bid down, instead the price of the deed is bid up. And unlike lien states where if you do pay premium for the lien, you do not always get your premium back (this depends on the state). And if you do get your premium back when the lien redeems, in most lien states you do not receive interest on the premium. However in Texas and Georgia in order to redeem the deed the delinquent tax payer must pay the penalty on the total amount the investor paid for the deed. So the investor gets his or her original investment back plus 20% (in Georgia) or 25% (in Texas).

The redemption times are also shorter than most lien states. In Georgia the redemption time is one year and in Texas on non-homesteaded and non-agricultural properties the redemption time is only 6 months. Contrast that to the higher tax lien states – Illinois and Arizona have redemption periods of 3 years, and Florida and New Jersey have redemption periods of 2 years.

The drawback to investing in these states is that they do not have online tax sales. Unlike some Arizona counties and most Florida counties, you have to show up to bid at the tax sale. So how can you take part in these highly profitable tax sales without spending too much money on travel to do your due diligence and attend the tax sale? There are actually a couple of ways that you could invest in these states without having to travel to them.

While you have to physically show up at the tax sale, or have an agent show up for you, you can do most of your due diligence online for the properties in the tax sale. Many of the counties now have online resources that let you look up the tax assessment data online, do a title search online, and even get a description and picture of the property. You can also find a local realtor who knows the area and can drive by the properties and take pictures of them for you. They can even go to the tax sale and bid on the properties for you. You do have to have someone physically bid for you at the tax sale, but it doesn’t have to be you that does the bidding. You can find a realtor who will do this for you with the understanding that if you purchase a deed and wind up with the property they will be the one that will get the listing.

Anther way to participate in these tax sales without traveling to Texas or Georgia is to use a tax investing agent who specializes in investing in these states. A tax lien investing agent will invest your money for you. They will set up an account for you, purchase the deeds in their name and then assign them to you. Some agents are able to do this with money from your self-directed IRA. When they use money from your retirement account there are more guidelines that they have to follow in order meet requirements from the IRS and your IRA custodian. They will have to submit a report at least annually showing where your money is invested and how much profit has been made.

Platinum Investment Properties West is a tax investing agent that specializes in investing in liens in Illinois and redeemable tax deeds in Georgia and Texas. You can even specify which state or states you want to invest in. On Wednesday, March 9th I hosted a free webinar with Don Fullman and Charles Sells, co-founders of PIP West. Find out more about investing in the most profitable tax lien state and the 2 most profitable redeemable deed states with an experienced tax lien investing agent.

Here is a link to the replay of this webinar: http://www.TaxLienLady.com/PIPwest-Mar2011/PIPwest-Mar2011.html. Joanne Musa works with investors who want to reap the rewards of investing in profitable tax lien certificates and tax deeds. Her tax lien investing articles appear all over the Internet. Tax Lien Lady’s Member’s Area is designed to help you navigate though the steps to building a profitable portfolio of tax liens or tax deeds. With 3 full courses, dozens of videos, and monthly webinar training, you’ll quickly move forward on your journey to tax lien investing success! Join us at www.TaxLienLady.com/Membership.htm

There are many advantages when a Super Fund acquires residential or commercial property. Just to name a few…

A maximum 10% capital gains tax on sale of property if held for at least 12 months;

Potentially nil capital gains tax on sale of property if sold in pension phase;

Maximum of 15% tax on rental income;

All rental income received assists in paying off the mortgage loan;

Any expenses such as interest, council rates, insurance and maintenance may be claimed as tax deductions by the super fund, which potentially reduces its tax liability;

The super fund pays the required deposit (+ costs) on the property being purchased;

If you are a self employed business owner and currently own commercial property, you can transfer this property into the super fund;

A great way to generate wealth for your retirement through tax effective super contributions;

Greater investment choices and control over your future;

The super fund can pay out or reduce the mortgage at any time (subject to the terms of the relevant loan);

Through gearing, the super fund can acquire real estate property for a greater value than that of the funds ‘net worth’;

Other than the property acquired, all other super fund assets are safe and cannot be touched by any lender due to the ‘limited recourse’ provisions in section 67 (4A) of the SIS (Superannuation Industry – Supervision) Act.

A Super Fund is now permitted to borrow money and charge assets provided the borrowing complies with the following:

The fund may select any property (residential, commercial, retail or holiday units). The purchase must usually be an arms length transaction (i.e. the property is purchased from a ’stranger’). There is an exception for ‘business assets’ (i.e. property leased to a tenant who conducts a business in the property). In this case, the property may be purchased from a ‘related party’ of the superannuation fund;

The legal title to the property must be held on trust by an independent trustee (called the ‘Property Trustee’ in these notes);

The beneficial title to the property will be held by the Super Fund;

A Lender will generally lend to the Super Fund on a limited recourse basis (i.e. the Lender’s recourse will be limited to the property, thereby providing the Super Fund absolute protection for its other assets). The Fund will charge its beneficial interest in the property to the Lender. In addition, the Property Trustee will grant a mortgage over the legal estate to the Lender. Certain lenders will also require personal guarantee from all members of the Super Fund;

All rents will be paid directly to the Fund;

The Fund will make loan repayments to the Lender in the ordinary way;

Funds can deal with the property however and whenever they like, in the same way as you can deal with ‘normal’ investment properties (e.g. lease, renovate, repair, or sell);

The Fund can pay out or reduce the mortgage at any time (subject to the terms of the relevant loan);

When the mortgage is paid out in full, title to the property may be transferred to the Fund by the Property Trustee or the Property Trustee may continue as registered proprietor.

It is important that the legal structure clearly complies with all the above requirements. Failure to do so may result in the Fund becoming a ‘non-complying’ fund within the meaning of the SIS Act.

It is also important to adhere to the lenders varying trustee requirements when establishing the legal structure.

http://www.smsflending.com

© SMSF Lending |ABN: 99 262 546 801

The Self Storage Association (SSA) in the UK is holding a European conference to be held in June of this year in Berlin, Germany. It’s entitled “Going for Growth” and is deemed to be “Europe’s largest self storage conference & trade show.” It includes seminar sessions, trade shows, and an annual dinner and awards ceremony.

What does this mean and why is this bit of event important? It simply means that self storage investment is spreading like wildfire-especially now that there is a global recession and people are looking for investment properties that are more stable and solid. And do you know where it all started? Here in the U.S.! Now, conventions are being held in Europe to help raise awareness as to the benefits of investing in self storage-as a way of rejuvenating the flailing economy of the world.

Ok, let me tell you a bit of history. Self storage first began in the United States in the 1960s. It’s growth was monumental as people did need a place to store their stuff-well, those they can’t sell and those that hold precious memories that they can’t throw away. It reached the UK in the 80s and it has spread to Europe and Asia in the last decade. Now, the fact that self storage has broadened to include almost all the continents, it says one thing about this industry; and that is, it is something worth investing into.

If it’s not one of the places to find best investment properties, then it surely won’t be used to revive floundering economies, now would it? Let me tell you a bit more about self storage investment-just so you know what to invest in when it comes to buying commercial properties.

Self storage is recession-proof. The stuff that people buy when the economy is good does not just go away and disappear once the economy goes bad. Those that they can’t bear to auction off get carted off to a storage facility. I guess this habit is also a symbol of hope as these people have not lost hope that their lives will become better again and they’ll soon move back into a bigger place where they can bring back all of their stuff.

It has a skyrocketing demand. Like what I’ve mentioned, people always need a place to put their extra stuff in-whether the economy is good or bad. Plus, the almost 79 million baby boomers who will be retiring will need a place to store the things they can’t take into their new and smaller homes, as well as when they go on vacation. These two combined make up for a steadily increasing demand for self storage units.

Banks almost always approves loans for self storage. Why? Because self storage has the lowest bank loan failure rate at only 8% and because it presents a lower investment risk as you only need a 67$ occupancy rate to break even. It also has low development (hello, steel roof, walls and doors only!), labor costs (you only need one facility manager or even just a kiosk would do!) and operating costs (no leaky roofs and broken toilets!).

These are just the top three reasons why self storage investment is taking the world by storm! It’s spreading steadily and soon, the market will be tight with competition. So, I advise you-just like what I’ve been advised of-to take advantage of this opportunity now and be a factor in helping our economy recover.

Commercial Property Investing in Self Storage is a cash flow machine with hidden benefits.

The Self Storage Association (SSA) in the UK is holding a European conference to be held in June of this year in Berlin, Germany. It’s entitled “Going for Growth” and is deemed to be “Europe’s largest self storage conference & trade show.” It includes seminar sessions, trade shows, and an annual dinner and awards ceremony.

What does this mean and why is this bit of event important? It simply means that self storage investment is spreading like wildfire-especially now that there is a global recession and people are looking for investment properties that are more stable and solid. And do you know where it all started? Here in the U.S.! Now, conventions are being held in Europe to help raise awareness as to the benefits of investing in self storage-as a way of rejuvenating the flailing economy of the world.

Ok, let me tell you a bit of history. Self storage first began in the United States in the 1960s. It’s growth was monumental as people did need a place to store their stuff-well, those they can’t sell and those that hold precious memories that they can’t throw away. It reached the UK in the 80s and it has spread to Europe and Asia in the last decade. Now, the fact that self storage has broadened to include almost all the continents, it says one thing about this industry; and that is, it is something worth investing into.

If it’s not one of the places to find best investment properties, then it surely won’t be used to revive floundering economies, now would it? Let me tell you a bit more about self storage investment-just so you know what to invest in when it comes to buying commercial properties.

Self storage is recession-proof. The stuff that people buy when the economy is good does not just go away and disappear once the economy goes bad. Those that they can’t bear to auction off get carted off to a storage facility. I guess this habit is also a symbol of hope as these people have not lost hope that their lives will become better again and they’ll soon move back into a bigger place where they can bring back all of their stuff.

It has a skyrocketing demand. Like what I’ve mentioned, people always need a place to put their extra stuff in-whether the economy is good or bad. Plus, the almost 79 million baby boomers who will be retiring will need a place to store the things they can’t take into their new and smaller homes, as well as when they go on vacation. These two combined make up for a steadily increasing demand for self storage units.

Banks almost always approves loans for self storage. Why? Because self storage has the lowest bank loan failure rate at only 8% and because it presents a lower investment risk as you only need a 67$ occupancy rate to break even. It also has low development (hello, steel roof, walls and doors only!), labor costs (you only need one facility manager or even just a kiosk would do!) and operating costs (no leaky roofs and broken toilets!).

These are just the top three reasons why self storage investment is taking the world by storm! It’s spreading steadily and soon, the market will be tight with competition. So, I advise you-just like what I’ve been advised of-to take advantage of this opportunity now and be a factor in helping our economy recover.

Commercial Property Investing in Self Storage is a cash flow machine with hidden benefits.

This is a story that you may be familiar with: Bank wants financial statements for your investment property to obtain a refinance. Your CPA requests your financial statements in order to prepare tax returns. It’s been a while since you last looked at your financial records and now you realize that you are several months behind on your accounting and bookkeeping records. With the day to day hustle and bustle, there just isn’t enough time to go through all the receipts, credit card statements, and bank statements to determine where you stand financially with regards to your investment properties. Then a feeling of guilt and stress lingers over you…

If you have experienced this feeling, not to worry: You are one of the MANY that we as CPAs see all the time. Bookkeeping is a tedious process. And frankly, there are not may people out there who enjoy doing it. The two most common complaints that we hear most often are: 1) I don’t have the time to do the bookkeeping and/or 2) I can’t afford to hire a bookkeeper. In this article, we will share some of the benefits of having accurate and up-to-date financial records as well as techniques to decrease the amount of time spent on maintaining those records.

Unfortunately, one of the most common ways that real estate investors keep track of their bookkeeping is what we refer to as the “Shoe-Box Method”. Essentially, this method involves the individual investor stashing all the receipts that have accumulated during the year into a big shoe-box. At the end of the year or tax return preparation time, individuals usually dread having to go through the box of receipts that are now spilling out of the box and spend a couple hours or even days going through and organizing these receipts into some sort of order. Other investors use accounting software to track their income and expenses but don’t really keep them updated on a month to month basis. There are two major flaws with this. First, the investor does not have a clear understanding of the actual performance of the investment property during the year if all the expenses are either kept in a box or not entered timely into the software. Second, receipts may be lost or misplaced and that results in inaccurate income statements as well as lost tax deductions! Those are two big reasons why having an accurate and updated bookkeeping system is extremely beneficial to those who invest in real estate.

So what are some of the benefits of having an accurate and updated accounting system for your investment properties? First, it builds credibility with lenders, buyers, and professional advisors. Imagine trying to take a box of receipts into a bank when you are trying to re-negotiate a loan on your property. The chances that the banker will spend time going through your receipts or relying on your financial information is slim to none. What about when a potential buyer requests to see financial information to determine the profitability of the investment property? Having accurate financial statements not only builds credibility for the property but it also allows potential buyers to do a quick evaluation and move forward in the buying process. Another benefit of accurate bookkeeping is that it allows the investor to review the financial performance of the investment property on a monthly basis. By doing so, the investor is now able to strategically determine where to cut costs, where to increase spending, and identify high performing areas within the investment that can be leveraged or tapped into to increase investment returns. Another important benefit of accurate bookkeeping is the ability to plan for tax deductions. When all your expenses are tracked carefully throughout the year, the chance of losing a tax deduction due to a lost receipt decreases significantly.

Although we all know the many benefits of having accurate bookkeeping, the reality is that most of us either don’t have the time to actually do it or don’t have the money to hire a bookkeeper. A good way to accomplish this would be to hire your CPA to work with you to “set-up” an accounting system that works for your properties. This means having them work with you to set-up accounts that accurately reflect the common and recurring income and expense items relating to your properties. Next, we recommend that you work with your CPA to streamline and automate as much of the data entry process as possible. The 2-step process above will allow you to develop and maintain an accounting system that is consistent with your tax saving strategy and allow for accurate and meaningful tracking of income and expenses for performance analysis. There are accounting software out there that can automate a pretty significant portion of the bookkeeping process. So setting it up correctly can significantly diminish the amount of time you spend on data entry.

Remember that having accurate financial information is a critical component to your success as an investor. It allows you the ability to make informed decisions on ways to increase your return on investment as well as maximize your tax benefits. You may not think you have the time or money for bookkeeping for your properties, but can you really afford to lose out on the tax benefits or opportunities to maximize your return on investment?

Amanda Han is a Managing Director at Keystone CPA, Inc., a firm specializing in tax mitigation strategies for business owners and real estate investors. For complimentary top-notch tax mitigation strategies, visit http://www.keystonecpa.com and sign up for the Monthly Newsletter and Member’s Library.