Key terms in Propsharing and real estate investing

Unit

A portion into which an asset is divided, similar to a share. Each Guiker asset is divided into 100,000 units.

Residential Property

Single-family: A building designed for one family to live in.

Duplex: A building designed for two families to live in, with a single wall separating the two units.

Multiplex: A building designed for multiple families to live in, with each dwelling having its own entrance within the larger building.

Commercial Property

Office: A building that has an area that allows for business activities to take place.

Retail: A building that has an area for a retailer to establish a shop and conduct their business.

Industrial: All land and buildings that accommodate industrial activities, including production, manufacturing, assembly, warehousing, research, storage, and distribution.

Net income yield

The relationship between the amount of regular income distributed to unitholders and the price of the unit. For example, a unit that costs $100 and distributes $2 to unitholders throughout the year will have a net income yield of 2%. Net income yield does not account for any changes in the property value or reductions to the mortgage balance.

Internal rate of return (IRR)

IRR is a key tool in real estate investment analysis. It helps investors figure out how profitable an investment might be over time by looking at the annual rate of return. Imagine you're planting money in a garden, the IRR helps you see how much your money will grow each year.

In simple terms, IRR helps you decide if a real estate investment is a good idea. It looks at how much money you put in at the start and how much you expect to get back later. If the IRR is high, it means the investment might make you a lot of money. But remember, IRR isn't the only thing to look at – sometimes, it's used together with other numbers to make smart investment choices.

Return on investment (ROI)

ROI is a metric used in financial analysis to estimate the profitability of potential investments. It’s calculated by dividing the total profit by the total investment and expressed as a single percentage. For example, if you invest $100 into a unit and your investment is worth $200 after five years, your return on investment would be 100%.

While ROI is easier to interpret, IRR offers a more sophisticated analysis, especially when assessing projects with varying cash flows over time.

Cap rate

Cap rate is the relationship between the amount of income a property generates with the cost of the property. For example, if a property costs $1 million (including taxes and fees) and generates $50 thousand in annual rental income after deducting expenses, the cap rate is 5%.

Distribution/Dividend

A distribution or dividend is the money distributed to unitholders who own a particular property. It comes from the net profit on rental income less expenses during a certain period and is distributed proportionally to investors based on ownership. The timing and amount of the payments will vary.

Primary offering

A primary offering is the first sale of units for a particular property.

Secondary offering

Once the primary offering has taken place, the units may be bought and sold from existing unitholders as part of a secondary offering.

Reserve

The reserve is the funds maintained for a particular asset to cover capital improvements or unforeseen expenses.

Closing date

The closing date is the last day that purchases of a primary unit offering are accepted or the date that the required funds have been received. Essentially, it’s either the date that the company decides to close the ability to invest in an offering and distribute shares to buyers or when all of the required funds have been raised; whichever comes first.

Offering memorandum

An offering memorandum is a legal document that states the objectives, risks, and terms of an investment involved with an exempt market security.

Exempt market security

When investments are sold to the public, a document called a prospectus is provided, which gives information about the investment and its risks. Exempt market dealers like Guiker who offer exempt market securities qualify to be exempt from this requirement by providing an offering memorandum. The offering memorandum is similar to the investment prospectus and serves to inform investors about the opportunity and its risks.

Ready to explore the potential of real estate investment with Propsharing? Check it out on Guiker today and discover how you can start building your property portfolio.

Asset

An asset is a property owned by a person or company, regarded as having value.

Ticker

A ticker is a unique short-code identifier for a specific property.

Portfolio

A portfolio refers to the range of investments held by a person or organization.

Wallet

In Guiker’s case, a user’s wallet contains their cash holdings on the platform.

Lease

A contract by which one party conveys land or property to another party for a specified time in return for a periodic payment.

Mortgage

A legal agreement by which a bank or other creditor lends money at a specified rate of interest to a borrower for the purposes of acquiring real estate.

Loan to Value (LTV)

This is the relationship between the mortgage on the property and the value of the property. When the LTV increase the risk associated with borrowing increase.

Net Asset Value (NAV)

In real estate investment, Net Asset Value (NAV) is a key metric that evaluates the value of a property. It represents the total market value of the property’s assets, minus liabilities, divided by the number of outstanding shares or units. This metric is crucial for gauging the property's overall value, helping investors understand the value of their investment.