Plottage
Categories: Real Estate
You get an inside tip that a group of developers are about to start work on a set of bombed out neighborhoods near downtown. You start buying property in the area, hoping to flip the real estate once all the development begins.
You start with one plot of land. Then you approach your new neighbors, buying a couple other plots. You keep going, adding property as fast as possible. Each time you buy an adjacent bit of property, you add it to a larger parcel. The process of joining the plots together is called assemblage. You are combining little bits to form a bigger bit. Assembling them, as it were.
As you do that, you increase the value of your growing parcel of land. If you have a larger parcel of land worth $5 million, and add another plot worth $250,000...now your total (even larger) parcel is worth $5.25 million. That increase in value is known as plottage.
The price of the land isn't going up yet. You are adding value (as in: the dollar amount you could sell your land for) by making it larger.
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Finance: What is REIT?8 Views
finance a la shmoop what is a REIT all right people let's start with the basics
the letters reet real estate investment trusts it's basically a mini mutual fund [REIT written on chalkboard]
for real estate investments think a chain of old age homes which might carry
a market value of a million bucks each but which throw off 80 grand a year in
net cash profits that is the entire chain of old-age homes throws off 80 [People with homes for heads appear]
grand a year in cash profits all right in melding together a whole bunch of old
age homes at least in theory the volatility of anyone home dying that's [Heart rate monitor appears]
the risk of it and then affecting the creditworthiness of the entire portfolio
of real estate holdings is lowered with scale a REIT can then borrow money more
liquidly or easily let the transaction cost $4 or a lot less and it can [Coins falling]
leverage its legal obligations and its meds buying process with scale because
it's a lot cheaper per pill to buy four million aspirin a month in just four
hundred along with volume deals on diapers and dentures that you know [Piles of diapers and dentures appear]
across a much bigger swath of buyers well REITs have been around for a while
ironically they came into existence as an extension of the cigar excise tax in [Man smoking]
1960 and extend as far in ownership as warehouses commercial office buildings
shopping malls where piercings happen in strange places and apartment complexes
of all shapes and sizes well to qualify as a read a company must invest at least [An apartment complex]
75% of its assets in real estate re there that they re NRB holding cash or
US Treasury bonds with the intent of investing in real estate it has to
receive at least 75% of its gross profits from real estate rentals it has
to pay out at least 90% of its taxable profits as dividends to its shareholders
annually and basically the government is saying well if you're gonna act like a [Man talking in congress]
REIT you actually have to be one you can't have 75 percent of your gross
profits in like oil dividends or dividends from tech companies if those
even exist well a REIT has to have at least a hundred shareholders and have
its ownership diversified such that at least half of its ownership shares are
held by five or more individuals like it has to actually look like a fund it
can't just be a shell corporation put up by one guy to uh you know take advantage [Man stood outside of Shell co.]
of the system well REITs are publicly available for
Joe Schmo to invest in they tend to pay a very high dividend and they grow asset
values at a modest premium to inflation like a few percent a year that is they
don't grow much but they pay a lot of cash dividend out and that's nice for [Cash falling]
old people so most of their payback to investors is
quote bond-like unquote and that's a REIT now keep an eye out for those bulk
diaper deals for grandpa and good luck dealing with the bulky diapers [Diaper throw into trash and woman appears]