For many investors, the ability to create consistent cash flow is one of the most attractive aspects of real estate investing. That’s true for HouseAfrica investors, too. That’s because HouseAfrica gives investors the potential for creating cash flow through yearly returns.
But what are HouseAfrica Returns? And how do they work?
HouseAfrica Returns are the payment of your share of the income from the property you invested in generated yearly from sources like loan interest and rental payments.
Unsure what that means? Let’s break it down further:
- Returns are generally the distribution of incomeearned from investments. Real estate can generate returns in two main ways: income and appreciation. Returns are the distribution of this income, and can also include other sources such as a return of capital. Appreciation is earned and paid differently. Will explain more on this as we go on.
- Investors can earn returns in proportion to their share ownership. The returns that an investor can earn are proportional to the amount of the investment that they own. For example, if one person owns 100 shares and another person owns 1,000 shares of the same property, the person with 1,000 shares is entitled to a greater portion of the return.
- Returns are prorated for the duration of ownership. An investor is entitled to their share of any income earned from a property while they own it. This means if a holding period of a property is, say 5years, the investor earns returns for five years and can decide to sell his shares at the current price value of that property there by also earning capital gain(appreciation).
How can HouseAfrica Properties earn income to create a dividend?
HouseAfrica properties can generate income through both debt and equity investments though we are focusing on equity investment at this early stage.
Equity Income Potential
Traditional equity investments can give investors certain rights, including the right to rental income when the property is rented to tenants. As a long-term investment, real estate investors with equity ownership rights can earn significant income over time from rental payments and capital gain when they sell their shares
When you become a HouseAfrica investor, you become the partial owner of dozens of properties across Nigeria and Africa. Regardless of whether the property is residential or commercial (focusing on Residential for now), an investor with equity ownership has the potential to collect a consistent income from the tenants who rent it.
For equity investment on HouseAfrica, a special purpose vehicle (SPV) is created with the investors and held with our Trustee company. Also, the property title is transferred to the SPV. A Special Purpose Vehicle (also known as Special Purpose Entity in the U.S.) is a legal and business entity created to fulfill narrow, limited, well-defined, specific or normally temporary purpose/objective.
HouseAfrica Return Distribution
HouseAfrica distributes returns through her Trustee at least 90% of their taxable rental income to shareholders every year in the form of what we called returns.
HouseAfrica makes return payments to investors in cash on their earning section on their dashboard. Investors can choose to reinvest their dividends back into their HouseAfrica account or Withdraw to bank accounts.
It’s important to note that the payout of your returns is not dependent on the value of your funds’ shares themselves. And to receive dividends, you do not need to sell any shares. In fact, you don’t have to do anything at all after the initial purchase of shares. When a returns are issued, you will receive it automatically without any added effort.
Returns Are Not Just the One Way that Your Shares Can Earn Money
Real estate investing holds the unique potential for generating both cash flow and long-term appreciation. While a property collects a steady stream of income from paying tenants, the real estate itself might gain value too. So when the property is eventually sold or when you sell your share if you want to, it can generate gains for its equity investors in addition to any of the income that it earned previously over the course of the property’s lifetime.
But unlike dividends, which are typically paid yearly throughout the lifetime of a property, appreciation is realized in two ways,
- When the property is sold: The property can be sold after a period of time, say 10years, the property is sold at its present value which most have appreciated from the cost of building the property.
- Investors can also realize appreciation at the fund level if the Net Share Value (NSV) per share increases over time. Depending on which property you hold, that may mean that a limited or significant portion of your return potential may be reaped when you want to sell your shares
Now that you have a better understanding of how HouseAfrica returns works, and you are interested in owning shares in properties, check out our available properties open for investment.
If you ever have any additional questions about our returns though, feel free to reach out to our team at [email protected]