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Wealth Migrate: Know Your Client (KYC) Process And Its Importance

As an investor you want the peace of mind to know that any financial transactions you complete on the Wealth Migrate platform are secure and comply with all necessary legal regulations. It’s for this reason that Wealth Migrate requires you to complete the Know your client (KYC) process before you can officially start crowdfunding real estate and structured note investments online. 

KYC is an important part of the trust-building process between Wealth Migrate and its investors, as it allows potential investors to identify and verify themselves.1 This is the first step in Wealth Migrate’s due diligence process which ensures that not only do our investors have peace of mind with their financial transactions, but that Wealth Migrate is a licenced company that upholds the laws applicable to its business and investors. On behalf of the company, it also needs to ensure it’s not dealing with investors that may be involved in illegal activities such as money laundering or fraud.2 

A crucial part of this process is by aggregating our global investors into a compliant special purpose vehicle (SPV) to create an investment network. This system screens and regulates against anti-money laundering (AML) and know your client (KYC) processes upon member registration. The financial transaction system handles all payments from investors and distributions back to investors. With America’s strict countenance on counter-terrorism and anti-fraud laws, Wealth Migrate isn’t prepared to accept the risks of investors from the United States of America. 
 

Additionally, Wealth Migrate has a valid Category 1 licence (FSP 47394) as granted by the Financial Services Conduct Authority, and this licence allows Wealth Migrate to provide its crowdfunding offering on an intermediary services basis using shares as a financial product category.3 The company is therefore held liable by the Financial Services Conduct Authority for complying with laws regarding its financial transactions.  

The KYC onboarding process is therefore a significant step to reduce the potential risks for both parties and ensure that the company and its investors are interacting in a trustworthy manner.4 The company is taking due care to ensure that the potential investor is who they claim to be and is using funds obtained legally for a legitimate purpose. This also works in the favour of an investor as the company must uphold its duties and responsibilities as well as provide transparency about its business as a licenced financial services provider. 

What information is needed to KYC? 

Some basic information is needed to ensure the investor’s identity is correct such as their full name, date of birth address and identification number. The documentation for submission needs to provide proof of the person’s identity, place of residence, and the funds for investment.5 

Typical documents include:6 

  • A driver’s licence 
  • A passport 
  • An identity document 
  • Utility statements for a mobile phone, electricity, or water 
  • Rental contract  
  • Bank statements 

How to KYC on the Wealth Migrate platform 

We’ve made this process easier and simpler as all the documentation can be submitted online. Investors will firstly need to sign up and create an account on Wealth Migrate and then undergo the KYC process. Within three days from submission, the KYC Team will do a preliminary cross-reference check and provide feedback via e-mail. 

Follow these steps to achieve a successful KYC process: 

Step one: 

  1. Create your investor account – register with your chosen e-mail address and password. 
  1. Country of residence – select the country on the drop-down menu. 
  1. Select your investor category – click on the type of investor profile that suits your investment style. 

Step two: 

You will be required to upload the following documents: 

  • Two forms of identification including the front and back of:
    • a driver’s licence 
    • an ID card 
    • and/or a colour copy of your valid passport 
  • A recent proof of address, no older than three months of either: 
    • a utility bill,  
    • a rates and taxes bill or Council Tax bill 
    • a mobile phone statement 
  • Bank statements will not be accepted as proof of address 
  • A full-page bank statement, no older than three months 

Step three: 

  1. You will receive an automated e-mail once your profile has been verified. 
  1. Your KYC status will display as ‘approved’ on your profile. 

We’ve also made some visual guides available as a downloadable PDF or video to help our members with this process so that they can start investing with ease. Download our thorough step-by-step guide here for an in-depth overview of the KYC process or view our quick “How to KYC” tutorial video here

Explore the investment deals available on Wealth Migrate’s Fintech platform and use these visual tutorials as a guide on your wealth creation journey  click here to learn how to invest, and learn to understand and interpret your investment portfolio, here

Real Estate Investments Unlock Financial Freedom

South Africans are struggling to achieve financial freedom with 34% not having enough savings to last more than a month if they lost their income/jobsi. However, this freedom can be within reach through investing in quality assets such as real estate to build up a passive income.  

“Financial freedom means having sufficient savings, investments, and cash on hand to afford the lifestyle you want,” says Scott Picken, Founder and CEO of Wealth Migrate, a leading fintech real estate investment platform. “Simply put, it’s the freedom to choose, and a steppingstone towards this is to build a passive income which is derived from investing your money in a product that generates profits, creates stability, security, and ultimately, freedom in your financial life.” 

When it comes to ways that people have been supplementing their income, Picken explains that investing in cryptocurrency such as Bitcoin has been rising over the past couple of years. “It is important to note that although you can secure a triple return on investment, the only way to get your money out is to sell.”  

He points out that real estate is one of the tried and tested investment vehicles through which people can earn a passive income. “In fact, 49% of the world’s wealth is held in property where people not only create their wealth but protect it too. However, only 12% of the global population has access to residential real estate and less than 1% has access to commercial property, which is where the real wealth is.” 

“It is for this reason that Wealth Migrate has reduced its minimum investment fee from $100 (approximately R1,570) to $10 (approximately R157) to give more South Africans greater access to the global real estate market,” says Picken.  

To assist new investors to get their foot in the door and work towards financial freedom, he shares six steps to real estate investing:  

  1. Belief: Henry Ford has been quoted as saying ‘whether you think you can, or you think you can’t – you’re right’. And the same applies to the belief that investing will help you find financial freedom. 
  1. Knowledge: The next step requires the investor to do research and to learn about the properties in which they would like to invest.  
  1. Accessibility: This refers to the action of investing – you can have all the knowledge about your desired investment, but unless you actually do something with it, it’s useless. 
  1. A system: Next, your system is what helps you manage your portfolios. 
  1. Accountability: As with anything new or difficult, the chances of doing it on your own are very small, but an accountability partner can help. 
  1. Results: This is the profits from your investment. If you want to get wealthy, you’ve got to get results.   

“Potential investors often believe this is a linear progression, but in fact it’s spiral, because once the results of your investment have been realised, you can go back to step one and reinvest all over again with a strengthened belief. I call this an upward spiral,” explains Picken. 

“The challenge is that it works the opposite way too,” he says. “A downward spiral exists because if the belief, knowledge, access, a system, and accountability are not there then you get no results. No one learnt to walk by reading a book, they did so through action, and I believe that the same applies to achieving financial freedom.” 

Picken shares that wealthy people prosper due to the habit of consistent investing. “Our philosophy is that, by dropping the minimum investment from $100 to $10, we can give a lot more people the opportunity to participate in the property market and start their journey to financial freedom. Over and above accessibility, we are giving them the ability to diversify their investment, enabling them to invest in 10 deals and assets across various countries and currencies.” 

He adds that by lowering the minimum investment fee, this also gives investors the opportunity to reinvest what they earn from their investments more easily.  

“To achieve financial freedom, South Africans need to take action and invest. Now is the time to take the next step,” concludes Pickens.  

The minimum investment fee will be $10 only until the end of May 2022. For more information, or to invest, go to https://wealthmigrate.com.  

About Wealth Migrate 

Established in 2010, Wealth Migrate is a leading fintech real estate investment platform that helps the 99% invest like the top 1% to create more financial freedom in their lives. In so doing, the company is closing the wealth gap, brick by brick. Wealth Migrate’s mission is to put the power of smart investing in everyone’s pockets by providing people with a safe and easy way of not only investing in residential and commercial real estate markets globally, but also by diversifying their investment. This is achieved through the use of technology and crowdfunding. For more information, or to invest, go to https://wealthmigrate.com.  

Understanding the role of a sponsor in commercial real estate

For anyone interested in investing in commercial real estate, it is important to understand the roles of the parties involved. The sponsor plays an active part in the success of the investment, while the investor has a more passive role.

A sponsor is responsible for “finding, acquiring, managing, and eventually disposing of real estate property on behalf of the partnership [1] Sponsors own the property, run day-to-day operations, oversee the transactions, raise money from investors, and are accountable for the mortgage of the property.[2]  Due to the wide scope of responsibility, selecting the sponsor with credible experience and a successful track record is critical for the well-being.[3]

Wealth Migrate vets our sponsors in our marketplace in accordance with all security and legal compliance checks. This responsibility on our part makes it easier for our investors to focus on the process of investing.

We evaluate our sponsors according to the check list below:[4]

  • How much experience does the sponsor have in the local marketing and that asset class?
  • Have any of the sponsor’s development projects failed to meet expectations?
  • How capable is the sponsor in evaluating risks?
  • How does the sponsor identify other equity investors and secure debt?
  • What systems does the sponsor have in place to ensure proper management of the project? 

The sponsor is mainly responsible for the performance of the property as well as financial reporting, making payments to investors, and preparing tax statements during the tax season.[5] As the time and cost involved that goes into preparing to acquire a deal is quite substantial, an acquisition fee is usually charged to cover costs and compensate sponsors for their work.

Sponsors make money with an acquisition fee, through ownership in a deal that ranges from 5%-10% in total equity, and annual asset management fees.[6] Sponsors are also incentivised by performance with a promote structure and preferred return.[7] This means that an investor is guaranteed a full return of their initial investment amount for a preferred return. 

Due to the importance of the sponsor, individual investors will ordinarily have to thoroughly research a potential sponsor. A sponsor must be trusted, have credibility, a proven track record, connections to right financing and equity relationships, and other expertise in operations and management. In terms of Wealth Migrate’s service offering, our investors can trust that we have performed the required due diligence before we partner with any of our sponsors.

[1] Kennedy, K. (March 2019). ‘The Importance of a reputable property investment sponsor’. Retrieved from LinkedIn.
[2] McKenna, R. (May 2019). ‘ Insider’s guide to vetting a commercial real estate sponsor ‘. Retrieved from BiggerPockets.
[3] McKenna, R. (May 2019). ‘ Insider’s guide to vetting a commercial real estate sponsor ‘. Retrieved from BiggerPockets.
[4] Robinson, D. (July 2019). ‘ Real estate sponsorship and sponsor equity: The key to selecting a great sponsor’. Retrieved from Black Collie Capital.
[5] Kennedy, K. (March 2019). ‘The Importance of a reputable property investment sponsor’. Retrieved from LinkedIn.
[6] Frankel, M. (February 2021). ‘ What is sponsor promote in real estate? ‘. Retrieved from Millionacres.
[7] Frankel, M. (February 2021). ‘ What is sponsor promote in real estate? ‘. Retrieved from Millionacres.

Wealth Migrate and Clem Sunter’s exclusive investment planning webinar

Cape Town, South Africa. In an exclusive webinar on global and local investment planning, Wealth Migrate CEO Scott Picken, played host to acclaimed scenario planner Clem Sunter on 18 August 2021. 

During this pre-recorded interview, Sunter identifies global and South African scenarios that could affect future investments. In particular, the flags to be aware of in assessing potential risks and opportunities, and he answers a few key questions from online viewers.

His most recent book co-authored by Mitch Ilbury, Thinking the Future: New Perspectives from the Shoulders of Giants, continues this futurologist theme on adaptable decision-making in a complex digital world. Published only in July 2021, this book has proven to be popular and is available in print and as a Kindle eBook.

Since the 1980s, Sunter has put together many possible scenarios for presentations as a keynote speaker in Europe, Asia, and Africa. He continues this legacy of exploring future possibilities as a prolific author of at least 17 books. In 2001, The Mind of a Fox, co-authored by ChantellIlbury, accurately captured the possible terrorist scenario of the 9/11 attacks on United States soil.

Sunter’s authority on scenario planning began when he was appointed to the positions of chairman and CEO at Anglo American’s Gold and Uranium division in South Africa. His primary responsibility was to head its scenario planning unit and guide its business strategy to mitigate risks.

For more information, view the webinar here.

Industry snapshot – a look into medical buildings

We’ve collated an overview of different viewpoints on medical office buildings (MOB) investments to provide a balanced perspective to potential investors. Look out for our upcoming industry report on medical real estate. Click below to register for the alert, and we’ll send it out when our industry report is available for download.

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Medical office buildings: asset class 

Think of upward growth in recent years followed by increased demand for outpatient services, including a consistent and robust performance. That’s one of the many reasons why the medical office buildings (MOBS) asset class remains a popular choice for investors. A subset asset class,1 MOBS are featuring strongly in investment portfolios of experienced real estate investors as global healthcare demands increase. This asset class has evolved to cater for tenants in the medical field to consult with patients and perform various surgical procedures.  

In this article, we examine the opportunities for investing in medical office real estate and how this asset type is maintaining its strong performance during the COVID-19 pandemic. 

Medical buildings perform well 

According to EquityMultiple, “compared to other asset classes, and the overarching office class specifically, MOBS generally exhibit uniquely steady long-term occupancy rates.” 2 CBRE’s 2019 Healthcare real estate investor and developer survey revealed that 99% of commercial real estate (CRE) firms in 2018 and 2019, found the occupancy of their medical office portfolios either remained stable or increased.3 The growth of MOBS has been significant as can be seen in the graphs below.  

EquityMultiple also found the average rental price for 2018 jumped to $23/SF, amounting to a staggering 1.4% yearly increase.4 

Outpatient healthcare 

Outpatient healthcare is simply services outside of a hospital, from a clinic to a private practice that includes the diagnosis, observation, consultation, treatment, intervention, and rehabilitation of medical conditions.5 The advancement of medical tech has enabled clinical innovation and more specialised treatments. 

These EquityMultiple statistics reveal the upwards growth curve for outpatient healthcare services:6 

  • The number of outpatient centres across America increased 51% from 2005 to 2016, with no signs of this slowing down 
  • To keep up with the demands of local healthcare, MOBS are being rapidly developed 
  • 2019 was a pivotal year for MOBS in Chicago, Cleveland, the Inland Empire region, and Atlanta, as these regions reflected the most growth 

Healthcare services and the effect of COVID-197 

Access to healthcare is a significant need for all. Telehealth has been viable alternative to traditional medical services during COVID-19, but doctors can’t practise all branches of medicine effectively with only virtual patient check-ups. While COVID-related closures have affected the healthcare industry, there will no doubt be a surge in services, due to patients that need basic and specialised treatments during and after the pandemic. Patients diagnosed with hypertension, diabetes and diabetes-related complications, cancer, and cardiovascular conditions have suffered from a lapse or lack of healthcare services since the COVID-19 pandemic.8 

The challenges of investing in medical office building assets9 

Before we look at the challenges of investing in medical office building assets, it is important to understand what type of medical office buildings we’re referring to as assets. 

HBRE, a healthcare real estate firm has a clear understanding of the MOB sector: 

  1. Hospital campuses – by necessity are large spaces that are costly, as various equipment and machinery need to be on for the hospital to function. These facilities also need a secondary power source for emergencies and specific requirements for plumbing, electricity and so on, to accommodate the many people that use the healthcare services daily. 
  1. Medical offices – like hospitals these spaces also have the same requirements but are set to a smaller footprint. If a medical office building is more than 250 yards from the hospital, the hospital outpatient department (HOPD) can’t claim reimbursement rates. There is provision for an off-campus HOPD, but the site still needs to be within 35 miles of the main campus. 
  1. Retail medical offices – only treat patients with acute illnesses, this service is specialised and may not offer the full range of healthcare options that a hospital does. 

Global healthcare: 202210 

Deloitte’s 2022 Global Health Care Outlook focuses on six main factors that will influence health outcomes. While we acknowledge that everyone will have their own needs and services, this lends itself to the realisation that organisations in this industry must start to personalise healthcare experiences.  

We’ve included a summary of this list: 

Consumer and the human experience
Care model innovation
Digital transformation and interoperable data
Social-economic shifts
Collaboration
Future of work and talent

The model of care has changed from a focus on the physical body only to a patient’s mental state and general well-being. From using health data to track and monitor the patient’s health with their consent, to a sense of empathy in how healthcare is provided, healthcare has pivoted due to COVID-19 to include more at-home prescription deliveries, remote consultations, and digital diagnostics. IT systems that offer this convenience of real-time data offer clues to behavioural research, patient habits, and even link people to a like-minded community where healthcare organisations and companies have more access to their patients’ lives than ever before. 

Medical office building trends: America11 

America’s aging population is growing by an estimated 36% according to the CCIM Institute, and those people will need at least three times the amount of healthcare services than younger people. A new law, the Patient Protection and Affordable Care Act, also gives 32 million citizens the right to health insurance. It can be safely assumed that this will have a positive effect on job creation among health care practitioners, which would lead to growth in demand for medical office buildings. 

America is a good location for medical office buildings12 

Not only have health services have been partially or completely disrupted in many countries, but worldwide COVID-19 has also taken a physical, mental and financial toll. One thing that is clear, is the need to prioritise adequate holistic healthcare services for inpatients and outpatients alike. 

Americans’ health status has regressed over the last year as many COVID-19 survivors suffer from long-term health issues due to the pandemic. During this crisis, opportunities arose as the industry evolves towards a seamless and integrated patient-provider relationship. 

Colliers 2021 Healthcare Marketplace Report provides much-needed insight into how the MOB field is performing and where it’s doing well: 

  • The US MOB vacancy rate was 8.6% at the end of 2020, versus 7.8% in 2019 
  • In 2020, demand outpaced supply across the top 50 metro markets 
  • Average MOB triple net lease rents were $20.95 per square foot, up from $20.22 per square foot in 2019 
  • MOB deliveries in 2020 totalled 20.2 million square feet, down from 22.5 million square feet 
  • MOB sales volumes held up well in 2020, totalling $11.1 billion 

The US market clearly shows high demand, and we believe that it has strong fundamental factors supporting investment into the MOB asset class. It’s for this reason that we believe the Hamilton-Young Medical Center makes for an appealing investment. Momentum Weatherly LLC’s acquisition of it provides an opportunity to invest in an American MOB with a strong rent roll, that’s generating immediate cash flows. 

1 (March 2021). ‘Investing in office real estate’. Retrieved from EquityMultiple
2 Angelini, C. (August 2020). ‘Medical office building real estate in focus’. Retrieved from EquityMultiple
3 (2019). ‘2019 Healthcare real estate: investor and developer survey results’. Retrieved from CBRE
4 Angelini, C. (August 2020). ‘Medical office building real estate in focus’. Retrieved from EquityMultiple
5 Abrahams, K., Balan-Cohen, A., and Durbha, P. (August 2018). ‘Growth in outpatient care’. Retrieved from Deloitte
6 Angelini, C. (August 2020). ‘Medical office building real estate in focus’. Retrieved from EquityMultiple
7 Angelini, C. (August 2020). ‘Medical office building real estate in focus’. Retrieved from EquityMultiple
8 World Health Organization. (June 2020). ‘COVID-19 significantly impacts health services for noncommunicable diseases’. Retrieved from World Health Organization.  
9 (December 2020). ‘The pros and cons of each type of medical facility’. Retrieved from HBRE
10 (2021). ‘2022 Global health care outlook: are we finally seeing the long-promised transformation?’. Retrieved from Deloitte.
11 Wassik, P., and Carlson, D. (2022). ‘Medical office trends: hospital affiliation is a strong indicator of MOB asset value.’ Retrieved from CCIM Institute.  
12 Janus, S., Seaward S., and Larson, N. (April 2021). ’2021 Healthcare marketplace report’. Retrieved from Colliers

Diversification: The Strategy of Numbers

Diversification is important to investors as it is a way of balancing risks and rewards. Allocating capital into a variety of assets lowers risk exposure. Rather than concentrating money into a single company, industry or asset class, investors can diversify their investments across a range of different companies, industries, and asset classes.1

Risk minimisation and increasing opportunities for success

The risk of not following a diversification strategy is high; instead of placing all your hopes on a sole investment, dividing your funds across all assets is the smarter strategy. To put it more simply, don’t put all your eggs into one basket as an investor.

Respected global financial expert Ray Dalio has this advice for investors to reduce risks without reducing expected returns. “Diversify between currencies, asset classes, and countries as the best way to reduce risk without reducing opportunity.” 2 According to my own research, this advice should ideally include partners as well, I describe this in example three with reference to a single company.

He goes on further to explain this strategy in detail and calls this the holy grail of investing. He advises that investors, “Need 15 uncorrelated bets, an array of attractive assets that don’t move in tandem, reduce risk by 80% and risk/return ratio increases by a factor of 5!” 3

No idea what that means? You’re not alone.

Arguably diversification is such a simple term and yet it is such a complex thing to implement in your financial planning,4 let’s unpack what Dalio means by analysing a few real-life investment examples I’ve come across.

Implementing diversification in financial planning

A homeowner is advised by his financial advisor to pay off his house first before he starts investing. He lives in an emerging market like South Africa, so he continues to pay down his mortgage on his home. He is entirely exposed to South Africa’s weakening economy and its volatile currency, which depreciates statistically by 6% a year against the US Dollar.

The result:
All his wealth is tied up in one: asset, country, currency, and partner. He isn’t making any money while he sleeps, and this is a classic situation where an investor has ‘all their eggs in one basket.’ 5

An investor flies to London and buys an apartment to try diversifying their investment portfolio, it is an affordable apartment for London, and it costs £500,000. They apply for and receive a 60% mortgage (loan-to-value) from the bank, and with the deposit and costs, they still need £225,000 in cash (about $300,000 USD). It is a one-bedroom apartment, and the investor needs to arrange for a rental management partner to find a long-term tenant to earn an income on the property.

The result:
This investor also has most of their eggs in one basket, the investment is in a single country, currency, asset, and one partner. If the tenant stops paying, they lose all this income. Factor in challenges such as Brexit or any other economic setbacks, and the asset is fully exposed. If the rental management agent isn’t good, this is a problem as the investor relies solely on this partner to obtain a tenant, get an income and achieve success.

In 2014, I focused on a specific genre and asset class in America. Initially, we had a number of different partners, but then in 2018, all these properties and partnerships were consolidated into a single company. From 2014, these assets and individual partners were well-performing assets, producing a high income. Some investors liked the performance of these investments and invested all their capital. Due to COVID-19 and other factors, this consolidated partner (now one company) has vacancies on many of their assets and isn’t paying out the expected income.

The result:
The investors placed all their eggs in one basket. Granted, investors have multiple assets; however, this is an investment in a single country, currency, and with one partner. If the partner experiences problems, investors are fully exposed to the risks. It’s akin to one partner carrying all the investors’ eggs in one basket.

Hard-won investment lessons in diversification

I learnt this the hard way, and I’ve been investing internationally since 1999 and helping members in 170 countries invest over $1,18 billion (USD). I have learnt from the wealthiest investors and watched what they do. Here’s my perspective on Dalio’s advice about diversification. 

Imagine if the investors in either scenario were to do something like this. Take $100,000 (USD) and invest $10,000 (USD) in 10 alternative asset investment opportunities. These are diversified across countries, currencies, assets, and partners.

If two of the assets don’t perform well, the other 80% is still working. Therefore, the risk is reduced by 80%, there is no correlation between these assets, and they don’t move in tandem. The income and capital growth are diversified across 10 opportunities, and the risk or return ratio is increased by a factor of five. (This means you are five times better off).

The power of FinTech and Wealth Migrate

Through advances in tech and with digital platforms such as Wealth Migrate, you can create wealth simply and securely, starting from $100 (USD). Wealth Migrate’s mission is to make quality alternative assets accessible to anyone, anywhere, from any amount.

Over the last 12 months, my wealth creation journey has led me to:

  • Invest in 10 different assets
  • Across 4 continents
  • In 5 currencies
  • In 9 different asset classes 
  • With 10 different partners

Wealth Migrate has changed how I can invest. Not only is it digitally integrated with Lemon Way, the largest digital wallet provider in Europe, but this FinTech platform also grants me control over my asset portfolio by efficiently managing these investments. 

All distributions and dividends are paid straight into my digital wallet, and I can then decide to re-invest in more assets ranging in variety and diversity. One of my highlights is that despite the challenges of COVID-19, I still received a weighted internal rate of return of 14% in the last 12 months.

Learn from the wealthiest investors about wealth creation and protection

Ray Dalio manages $160 billion (USD), and Bridgewater Associates is the largest hedge fund globally.6 By following his investment advice on diversification, investors can achieve success with their portfolios. Even if the investment amount ranges from $1,000 (USD) and $100 (USD) is invested into 10 deals, or if it’s $10 million (USD), Wealth Migrate will allow investors to emulate this method of wealth creation. 

The world has changed and with that, we must change our conditional way of thinking. It’s no longer about buying one apartment or trusting one partner, it is about diversifying and investing in the best partners and the best global opportunities. During the last year, an estimated “25% of all real estate private equity capital is now raised using online crowdfunding in America” 7. This trend is rapidly advancing around the world and now you can take advantage of it.

This is my ten cents on diversification, based on what I see happening in the market. I invite you to copy and invest like the most successful investors in the world.

1 Robbins, T. (February 2017). ‘Unshakeable: your financial freedom playbook creating peace of mind in a world of volatility. Retrieved from Unshakeable.
2 Graffeo, E. (November 2020). ‘Investing legend Ray Dalio tells investors to not own bonds or cash’. Retrieved from Markets Insider
3 Robbins, T. (February 2017). ‘Unshakeable: your financial freedom playbook creating peace of mind in a world of volatility. Retrieved from Unshakeable
4 Comstock, C. (September 2011). ‘Here’s the most brilliant thing Ray Dalio said at his interview last week’. Retrieved from Business Insider
5 Gravier, E. (November 2021). ‘Every financial planner will tell you to diversify your portfolio — here’s what that means’. Retrieved from CNBC.
6 Copeland, R., and Levy, R. (January 2020). ‘Ray Dalio is still driving his $160 billion hedge-fund machine’. Retrieved from The Wall Street Journal.
7 Gower, A. (2021). ‘Real estate crowdfunding unleashed’. Retrieved from GowerCrowd.  

The commercial real estate outlook for 2021 in the United States

Changes to the global investment market from 2020 leading into 2021 have been affecting commercial real estate, and Wealth Migrate analised what this means for you. While the markets settle down and start returning to normal, this gives investors opportunities to make smart decisions on how to grow wealth as the economy starts to resume. [1] Globally, countries are also implementing large-scale COVID-19 vaccinations within their borders, which will assist in restoring normal activity to economic markets.[2]

We agree with Forbes that the following four main factors will be the driving force for investment strategies in this market:[3]

  • Understanding investor behaviours and reasons
  • Establishing secure building spaces — working from home became a priority due to COVID-19, resulting in more vacancies for commercial offices in high-traffic areas[4]
  • Increasing efficiency through tech — e-commerce grew exponentially during the pandemic with businesses tailoring its ”just-in-time inventory model to a just-in-case approach”[5]
  • Identifying challenges and vulnerabilities in your investment portfolio assets

Commercial real estate asset classes also differ according to location, and you should plan your investment strategy accordingly.[6] Investors looking to America can expect “a high diversity of potential outcomes in play and an outlook of a nearly 40% increase in total U.S. transaction volume according to CBRE”.[7] Knowing the latest trends and predictions for 2021, will help you decide where to focus your investment plans in the American commercial market.

Here are six emerging trends and insights you should be aware of this year:
  1. Industrial
    The increase of online shopping has driven up demand for the final distribution center to the shopper at home. Malls are being looked at to turn into potential distribution centers.[8]

  2. Hospitality
    Occupancy and revenue were hit particularly hard but are now seeing a slow recovery due to the return of travel (locally and internationally) and business conferences. Further research shows it might take up a few years for hospitality to return to pre-2019 levels.[9]

  3. Office
    The move to remote working has hit offices very hard, particularly in downtown business centers. Offices have been the hardest hit of the commercial assets during 2020, but this has given opportunistic groups looking to expand, a chance to invest in prime commercial real estate.[10]

  4. Multifamily
    Multifamily apartments have been the best performing asset during 2020 with strong occupancy and collections rates that have been helped by stimulus checks and savings. The demand for affordable financing has greatly increased for assets in this class.[11]

  5. Student housing
    Top tier campuses are absorbing students from nearby schools, causing a demand for housing. Schools have also converted on-campus housing to single occupancy, driving up demand for off-campus housing that are within walking distance of campus.[12]

  6. Medical office
    Medical buildings that have tenants offering critical care and procedures, and not optional care and procedures, should be considered. A strong location and tenants are a must, as there is a trend shifting to in-home care.[13]

These are promising signs for investments in the American commercial real estate market, and we recommend that investors choose their asset portfolio with care. In the long-term, Wealth Migrate believes that investors that have done their research will benefit from the unique opportunities in this market.

[1] Gora, B. March 2021). ”Commercial Real Estate Investing 101 in 2021′. Retrieved from Commercial Property Guide.
[2] Ventura-Rozen, G. (March 2021). ‘What 2021 Looks like for the commercial real estate market’. Retrieved from Forbes.
[3] Ventura-Rozen, G. (March 2021). ‘What 2021 Looks like for the commercial real estate market’. Retrieved from Forbes.
[4] Ventura-Rozen, G. (March 2021). ‘What 2021 Looks like for the commercial real estate market’. Retrieved from Forbes.
[5] Ventura-Rozen, G. (March 2021). ‘What 2021 Looks like for the commercial real estate market’. Retrieved from Forbes.
[6] Cambridge Associates. April 2021. ‘US real estate outlook: patience required’. Retrieved from Cambridge Associates.
[7] Cambridge Associates. April 2021. ‘US real estate outlook: patience required’. Retrieved from Cambridge Associates.
[8] Berry, J. and Feucht, K. (December 2020). ‘2021 commercial real estate outlook’. Retrieved from Deloitte.
[9] Berry, J. and Feucht, K. (December 2020). ‘2021 commercial real estate outlook’. Retrieved from Deloitte.
[10] Berry, J. and Feucht, K. (December 2020). ‘2021 commercial real estate outlook’. Retrieved from Deloitte.
[11] Berry, J. and Feucht, K. (December 2020). ‘2021 commercial real estate outlook’. Retrieved from Deloitte.
[12]  THRESHOLD Agency. (February 2021). ‘The future of student housing in a post-COVID world’. Retrieved from THRESHOLD.
[13] Eisenberg, R. (September 2020). ‘Seven urgent changes needed to fix senior living’. Retrieved from MarketWatch

How you should invest in commercial real estate: Crowdfunding vs REITS

At Wealth Migrate we believe in our offering and helping our investors navigate the world of real estate assets. To this end, we’ve examined the fundamental differences between crowdfunded and real estate investment trusts (REITS) assets, as this is a commonly asked question of which investment vehicle is better.

With real estate being one of the biggest asset classes globally and a trusted method for profitable investment, most investors are keen to invest.[1] This becomes tricky when considering which route is best and how you should invest in real estate.

What crowdfunding and REITs entails

Whenever real estate investing is discussed, there are different investment options for investors, two of the most popular methods are crowdfunding and real estate investment trusts (REITS).[2] Although both are invested in real estate, there are some fundamental differences between the two that range from liquidity, to risks, tax consequences, and barriers to entry.[3]

The key differences for both investment methods:[4]

  • A REIT is a company that owns and operates income-producing real estate. 
  • Typically, REITS are spread out over a portfolio of properties in a single asset class. 
  • Crowdfunding real estate is when a group of investors are purchasing one property and pool together their money to purchase it.
  • For crowdfunding there are only one or a few properties that the investor is invested in, and usually only accredited investors are allowed to invest.

Liquid

REITS are highly liquid, meaning that they can be bought and sold easily, so if an investor needs money, this is a convenient method of investment.[5] The same cannot be said for an investor that has a share in crowdfunded real estate that wants to sell it off quickly. Shares in a crowdfunded real estate are not transferable and the money is only received at the sale of the project or during refinancing.[6]

Risks

REITS offer a steady income that comes with the costs of having lower returns.[7] In this regard, there are REITS costs for covering the operation of the REITS and other expenses that are incurred before the investor is paid. On the other hand, crowdfunded real estate has more inherited risks because it is a single project and the equity partners in a deal.[8] As a result, the income is not as predictable, and the returns can vary from the predicted figures.

Tax consequences

REITS are considered paper assets, with the taxation different to investing directly in real estate as a partner. REITS can be purchased with tax-deferred retirement accounts, but the dividends from REITS are taxed as ordinary income.[9] Investing in real estate directly allows investors to be considered as partners and take advantage of tax-benefits such as depreciation, this allows investors to receive tax credits to reduce their taxes.[10]

Barriers to entry between REITS and crowdfunded real estate

Purchasing REITS is like buying a share in a stock where an investor can buy as much as desired with no minimum investment amount.[11] On the other hand, crowdfunding real estate has specific requirements for a minimum investment,[12] and this needs to be considered by investors that accept and understand the nature of these investments, before investing.

With all these factors to consider, it’s important that when you invest you understand the strategy and risks between REITS vs crowdfunded real estate. Both are attractive options, but your decision will depend upon your personal preference and your level of investment.

[1] Picken, S. (2019). ”Direct Real Estate Investing vs REITs vs Syndication vs Crowdfunding vs Collaborative SMART InvestingTM”. Retrieved by Scott Picken.
[2] Bryant, S. (April 2021). ”REITs vs. Real Estate Crowdfunding”. Retrieved by Investopedia.
[3] Frankel, M. (April 2021). ” Where to Invest: Real Estate Crowdfunding vs REITs”. Retrieved by Millionacres.
[4] Bryant, S. (April 2021). ”REITs vs. Real Estate Crowdfunding”. Retrieved by Investopedia.
[5] Benson, A. (May 2021). ” Real Estate Crowdfunding: what to consider”. Retrieved by NerdWallet.
[6] Picken, S. (2019). ”Direct Real Estate Investing vs REITs vs Syndication vs Crowdfunding vs Collaborative SMART InvestingTM”. Retrieved by Scott Picken.
[7] Picken, S. (2019). ”Direct Real Estate Investing vs REITs vs Syndication vs Crowdfunding vs Collaborative SMART InvestingTM”. Retrieved by Scott Picken.
[8] Frankel, M. (April 2021). ” Where to Invest: Real Estate Crowdfunding vs REITs”. Retrieved by Millionacres.
[9] Benson, A. (May 2021). ” Real Estate Crowdfunding: what to consider”. Retrieved by NerdWallet.
[10] Frankel, M. (April 2021). ” Where to Invest: Real Estate Crowdfunding vs REITs”. Retrieved by Millionacres.
[11] Benson, A. (May 2021). ” Real Estate Crowdfunding: what to consider”. Retrieved by NerdWallet.
[12] Bryant, S. (April 2021). ”REITs vs. Real Estate Crowdfunding”. Retrieved by Investopedia.