By CJ Follini | NOYACK Logistics
November 16, 2022
Part 4:Retirement Planning
The fourth piece in our “Let’s Talk Logistics Real Estate” series focuses on retirement planning. Individuals investing for retirement should understand the value of real estate in their portfolio. Investors can no longer unlock their wealth’s full potential by relying on the “traditional” mix of stocks and bonds that once served them so well.
Read on for an overview of real estate’s value in retirement plus a three-step process for how to invest in NOYACK’s logistics REIT. Be sure to check out articles one, two and three in our series if you missed them.
Retirement investors often want to check a few boxes with their investments. One of the most important ones is to maintain a consistent source of income in support of spending needs. REITs are a great choice to check this box because they must pass along 90% of their income via dividends, which introduces a level of income consistency that’s difficult to find in other investments.
Many investors also seek stability because selling a volatile investment at a low can lock in losses and introduce sequence-of-return risk. REITs achieve stability for retired investors through the 90% income distribution mandate by giving their investors a consistent source of income, allowing them to reduce their sequence-of-return risk that would be assumed through the inopportune liquidation of traditional assets. Further, REIT property managers can also raise rents in response to inflation-driven instability, and our logistics REIT even includes properties with special provisions that move in lockstep with certain inflation measures. We offer even further stability through diversification in our real estate. Specifically, we invest in five broad property asset classes and also diversify within each category.
Step 1: Determine eligibility
Investors looking to make an allocation to real estate for their retirement account must first determine whether they meet the qualifications to be an accredited investor with one of two criteria. First, anyone qualifies if their income exceeds $200,000 ($300,000 with a spouse) for the two prior years and is reasonably expected to maintain that income for the following year. Second, anyone qualifies if their net worth (either or alone or with a spouse) exceeds $1 million.
Depending on how you qualify, you have three options to verify your accredited investor status. You can verify both income or net worth through obtaining written confirmation from a broker-dealer, registered investment advisor, licensed attorney, or CPA. More details about this option and the other two are discussed here.
Step 2: Confirm suitability
If those investing for retirement qualify, they must also consider a few parameters around investing in the fund. First, there is a minimum investment of $20,000. Second, they must consider how much income that they would like to receive annually while invested. The fund targets an approximately 6% annual cash flow and an investment return that is between two and two-and-a-half times its initial value at the end of the 5-7 year time horizon. Investors can reinvest their annual cash flows if they would like to increase the amount they receive at the end of their investment time horizon, but this will limit how much money they can access during this period.
Step 3: Rollover funds
Finally, individuals looking to invest in our logistics REIT through an IRA must have a self-directed IRA, which is similar to a typical IRA except that it allows investors to purchase alternative investments such as private real estate. NOYACK can help you to find a provider to help set up this account as well as rollover funds from another IRA or 401(k) into the self-directed IRA.
Future articles in this series will dive into the various ways that our logistics REIT can add value.
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