10 April, 2020

Demystifying common real estate terms with Cofundie

Scrolling through the Cofundie platform, you will notice a couple of terms recur fairly regularly in our attempt to give you the details of the deals & investment opportunities.

For the most part, these terms are industry standard and similar to the general definitions while some are more specific to Cofundie & our unique model.

This article will contain detailed explanations of what the different terms mean, how they affect you and what they mean for the investment opportunity you are currently exploring.

Projected Return(PR)

This is the total amount in per cent you can expect to make back from your initial investment on Cofundie including rental & sales income. It will vary from property to property based on the primary use of the property, the hold period, the growth potential of the location & the funding structure( Equity or Debt)

Funding structure

Deals on Cofundie will typically be funded in one of 2 ways; Debt & Equity.

In debt models, your investment serves as a loan to the builder & your return is your initial capital + a share of the interest paid on the loan when it is paid back. This structure is employed for smaller deals with shorter hold times. Cofundie will usually hold the title of the property as collateral until the debt is fully paid.

With the equity model, you own a share of the property and are entitled to both rental income for the lifetime of the project & a share of the sales price of the building. This model is employed for larger buildings with longer hold periods. The hold periods range from 5 years to forever.

Internal Rate of Return (IRR)

This is the average annual return on your investment when the time value of money is factored in. It essentially tells you how quickly your money is coming back out of the property

It is the expected compound annual rate of return that will be earned on a project or investment. Think of it as the rate of growth a project is expected to produce.

Hold period

This is the length of time we expect to hold a particular property on your behalf before it is sold. This includes build time and can vary from anywhere between 1 to 10 years sometimes more.

This period is calculated by careful analysis of the fundamentals of the project and determining the best time that the project can be sold when profit can be maximised for you.

Minimum Investment

This is the cost of 1 share of a Property on Cofundie. It is the lowest amount you can invest in any of the deals displayed on the platform. To be considered a Cofunder, you have to buy at least 1 share of a property, however, there are no maximums and you can buy as many shares in as many properties as you want subject to availability.

Primary material

At Cofundie, we fund buildings created using different alternative & non-traditional materials. Due to their nature, they are eco-friendly, costs less and have a faster build time. There is also no structural compromise & they are generally as strong as or even stronger than buildings built with traditional materials

Preferred return

This is the fixed, pre-determined, minimum return you can expect on your investment on Cofundie. This is the first return distributed after the investment starts to make a profit.

Distribution frequency

How often we target to make distributions to investors. Distribution Frequency is typically either monthly, quarterly or annually but is determined by the kind of property & its income profile.

First distribution.

The target date when you will receive your first cash distribution from the investment.

Equity Multiple

Equity multiple is one of the most important and effective financial metrics used in commercial real estate. An equity multiple is designed to compare the cash that an investor has put into an investment to the amount of cash that the investment has generated over a specific period of time.

This is calculated by;

Equity Multiple = Total Cash Distributions/Total Equity Invested

This is a living document, and we hope you will come back here to check the meaning of any terms you might be confused about.

send us an email for any further clarifications: info@cofundie.com

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