InSight

What to know about investments in industrial buildings

Financial Planning Dentist

Investing in industrial properties, such as warehouses and manufacturing facilities, can be a lucrative opportunity for investors. However, like any investment, it comes with its share of benefits and drawbacks.

Benefits of Industrial Investments:

  1. High cash flow potential: Industrial properties often have long-term tenants and can generate high rental income, providing a reliable cash flow for investors.
  2. Lower operating costs: Industrial properties typically have lower maintenance costs and fewer tenant turnover expenses compared to other types of commercial real estate.
  3. Increasing demand: The growth of e-commerce and logistics industries has increased the demand for industrial properties, making them a valuable investment.
  4. Diversification: Investing in industrial properties can provide diversification to an investment portfolio.

colorado investment professionals, boulder colorado real estate investment expertise.

 

Drawbacks of Industrial Investments:

  1. Location: Industrial properties are often located in less desirable areas, which can affect their value and potential for rental income.
  2. Tenant risk: Industrial tenants may have specialized requirements and may be more difficult to replace if they vacate the property.
  3. Environmental issues: Industrial properties may have environmental risks or liabilities associated with them, which can impact the property value and require costly remediation.
  4. Limited tenant base: The tenant pool for industrial properties may be limited to a specific industry or type of business.

The most exciting benefit of investing in industrial properties is the high cash flow potential and increasing demand. The cap rate, or the ratio of net operating income to property value, should be evaluated to ensure a good return on investment. Generally, a higher cap rate indicates a better return on investment, but this can vary depending on the location and condition of the property.

There is a moderate level of risk involved in investing in industrial properties. Location, tenant risk, environmental issues, and limited tenant base are all factors that can impact the value and potential for rental income.

People typically invest in a variety of industrial properties, including warehouses, distribution centers, manufacturing facilities, and storage units. The specific type of industrial property depends on the investor’s goals and market conditions.

In conclusion, investing in industrial properties can offer high cash flow potential and diversification to an investment portfolio. However, careful evaluation of the property and market conditions is necessary to minimize risk and maximize returns.

More related articles:

Articles
Kevin Taylor

Why we rebalance?

“Rebalancing is both risk management and capital growth” In this Article: the effect of our recent rebalancing a view of our process in action the result of active risk mitigation Overview Our rebalancing process is an important discipline we maintain in good times and bad. It helps us trim positions we may like, in favor of a long-term process we love. Rebalancing is the process of right-sizing a position in the portfolio to keep the risk in line with our expectations. It means we sell outperformers and buy underperformers. Which might seem counterintuitive – but works well over time, and allows us to sell high and buy low simultaneously. Minor course corrections can make a major difference. Our Process in real-time Here is a chart of Netflix, a growth stock that we are encouraged by the outlook. We have a $600 price target on it and remain bullish. The bottom line is, we like the future of NFLX, but as a result of our investment process, we trimmed the position in many of the portfolios. As a result of its run-up from $480 to $545 we sold on 7/15 (marked by the white arrow) and took profits for our clients. So this “sell” was not the result of our fundamental thesis on NFLX, but rather a commitment to how we manage the portfolio. The stock has since sold off, and the fundamentals will continue to be reviewed, but this portfolio rebalance is an example of how the process can support our strategy, even when it runs contrary to our plans for an underlying stock. Risk Management Explanation Reeling in stocks that outpace our expectations allows us to remove some risk in the overall portfolio, harvest gains for redeployment, and reposition capital into other lesser-performing stocks over a given length. Unlike other portfolio managers or robo-advisors that rebalance with a specific cadence (quarterly), our risk-centric rebalancing is based on a process of evaluating the broader index and an evaluation of risk alternatives. This process allows us to maintain upward momentum regardless of when it occurs. It also allows us to capture upside from the portfolio when risk conditions call for it.

Read More »

Definitions: Fiduciary

A fiduciary is a person or organization that acts on behalf of another person or persons. They at all times must put their clients’ interest ahead of their own. Being a fiduciary thus requires being bound both legally and ethically to act in the other’s best interests, and having a documented process that reflect and enshrines this standard. Registered investment advisors have a fiduciary duty to clients. Alternatively, broker-dealers, insurance companies, and financial advisors just have to meet the less-stringent suitability standard, which doesn’t require putting the client’s interests ahead of their own. This gap in their understanding of the duty to the client is what causes contamination in the client-advisor relationship. The Difference between suitability and fiduciary: Investment advisers and investment brokers, who work for broker-dealers, both tailor their investment advice to individuals and institutional clients. However, they are not governed by the same standards. Investment advisers work directly for clients and must place clients’ interests ahead of their own, according to the Investment Advisers Act of 1940. The majority of advisors, particularly those selling packaged financial products like insurance and mutual funds access simply meet the suitability standard. Meaning, that the products are an appropriate fit for other investors ‘like’ you and the due diligence ends there. This suitability standard is loosely defined as making recommendations that suit the best interests of their client. That is notably different from a standard of without conflict of interest. So while investments A and B might both suitable, A pays the advisor a substantial fee and is thus recommended more frequently and to a wide selection of clients. The law however has gone further to define what a fiduciary means, and it stipulates that advisers must place their interests below that of their clients. It consists of a duty of loyalty and care and generally is accompanied by a professional code of conduct that includes: Employ and provide the client information on the Prudent Practices when serving as an investment fiduciary and/or advising other investment fiduciaries. Act with honesty and integrity and avoid conflicts of interest, real or perceived. Ensure the timely and understandable disclosure of relevant information that is accurate, complete, and objective. Be responsible when determining the value of my services and my form of compensation; taking into consideration the time, skill, experience, and special circumstances involved in providing my services. Know the limits of my expertise, and refer my clients to colleagues and/or other professionals in connection with issues beyond my knowledge and skills. Respect the confidentiality of information acquired in the course of my work, and not disclose such information to others, except when authorized or otherwise legally obligated to do so. I will not use confidential information acquired in the course of my work for my personal advantage. Not exploit any relationship or responsibility that has been entrusted to me. There are three quick tests to determine if an advisor is a fiduciary: are they compensated at different ‘rate’ for any of their products are they encouraged though compensation or organizationally, to keep assets in a particular fund, strategy, or asset class are the fees solely paid by the client

Read More »
Boulder Wealth Building
Articles
Kevin Taylor

How to Get Wealthy – The Basics of Wealth-Building

Introduction: What is Wealth? The traditional definition of “Wealth” is the quality of life that a person can enjoy, which can be measured in terms of material possessions and financial stability. But the InSight definition is more inclusive. We think “Wealth” is the lasting capacity for something to generate value. This means cash-flow-producing assets. This means your health, investments, age, and behaviors that are accretive to income creation are all part of “Wealth Building.” Leveraging as many of those different channels, at a high level, for as long as possible. Wealth is a term that is often used to describe the accumulation of assets, such as money and property. Wealth is also often used to describe people who have achieved significant success in their careers or other aspects of their life. What is missing in the traditional concept of wealth, and something our clients understand is that Wealth is not a snapshot of your assets, it is the expectation that those current assets have the potential to create future incomes that support your goals. Themes and Topics for Building Wealth In this section, we will explore various topics that one needs to know in order to build wealth. The first step is to have a plan for what you want your money for. It could be for a car, a home, or retirement. You will need to have an idea of what you want your money to do for you in order to make it work. Next, you need to set goals and track your progress with specific steps toward achieving those goals. For example, if your goal is $1 million dollars by the age of 30, then you need to set milestones on how much you should save each month and how much interest it should earn each month in order to reach that goal by the desired date. Finally, there are many ways that one can invest their money such as stocks and bonds, but there are also other options such as real estate investing or starting a business. You may be interested in exploring these avenues depending on what type of Wealth you are looking to create. The key to all of this is the understanding that these investments (of time and money) should have the ability to generate cash flow at the desired rate. Once you have created the “model” for how you plan to build wealth, it’s time to move on to the tool for executing your plan. Understanding Your Worth and Creating an Annual Budget A budget is a plan for the future that helps you to know what your income and expenses will be and how much money you have available at any given time. For many, it can be a very useful tool for making sure that your spending matches up with what you earn. But the limitation is that budget “drafts” rarely become lived out in a family’s financial habits. Budgets are a fine start, but it’s a traditional approach to finance that simply fails over time because the equation is wrong: Income – Budget = Savings We try to coach clients to pivot inversely. Instead of crafting a budget to find savings, craft a savings plan that results in a budget. This puts the most important wealth-generating number (savings) early in the equation. Because we shift that focus and take care of first things first – the budget – which might still be important, is less mission-critical to the success of the financial plan. Our clients think: Income – Savings = Budget Creating an annual budget is a good way to keep track of your spending, set goals, and make sure that your spending is deliberate. But it’s not a good way to drive your worth and execute a financial plan. A change in the budget mindset is key to long-term success. Achieving Financial Goals For Yourself Setting financial goals is an important step in achieving your goals. We think clients should “dream big” and “be honest.” We don’t think those are opposites because we have seen that through planning a financial goal setting they can work cooperatively. What are your current financial goals? What are your long-term financial goals? How much money do you want to make in a year? What is your desired lifestyle? It is pivotal that these expectations for your long-term wealth are established early. A financial goal can be a great way to start living the life you want. Financial goals are not just about getting rich, they are about having the freedom to do what you want. A pair of long-term habits to master are 1) reinvestment and 2) automation – we coach our clients to get comfortable with these concepts: Understanding Money Management Basics and How To Save and Invest Wisely Before you can master your financial goals, it is important to understand how compounding interest works. Reinvestment – Compounding interest is when the interest that has been earned in a period of time gets added to the principal sum, and then earns more interest on that sum. It’s when your money starts making money for you! This is the same as reinvestment. We focus on coaching clients to view their portfolios as a collection of assets that generate cash flow. That cash flow is then reinvested routinely and programmatically. This means that when markets are “down” they are buying new “cashflow” cheaper – then as the market rises, they are selling “cashflow” when it’s overpriced. Automation – Financial goals are important to set. You need to know what you want to save for and how much you need to save on a monthly basis. There are many ways you can automate your savings and make sure that your money is going toward the things you want it to go towards. One way is through your corporate payroll. Your payroll system will automatically withdraw a certain amount of money from your paycheck every month and put it in the brokerage account so

Read More »

Pin It on Pinterest