Evening star. [volume] (Washington, D.C.) 1854-1972, 1962-12-15


changing business, the syn
dicator Is even developing a
new vocabulary including
cash flow" blank check
undertakings" constructive
receipt" and even "yo-yo
clauses" Cash flow is what
you have left out Of income
after paying expenses and
mortgage interest and prin-
cipal. The term is defined
here because 1t Is used be-
low
Advantages Listed
Why should an average In
weston be interested in local
real estate syndications7
/. He risks only his original
dollar investment.
2. The details and prob
lens of administration and
management are handled for
him by real estate profess
SIGNALS.
3. In addition to the cash
distributions he receives, his
equity is being increased
through mortgage payments.
4. An impressive portion Of
the money he receives is tax
sheltered.
5. Real estate provides an
effective hedge against infla-
ton.
8. The investor more easily
diversifies his holdings
through participation in syn
dications.
Z. The stability Of wash
ington makes local real es-
tate particularly strong.
Whot to Woteh For
There are many differences
among the various syndica-
lions. Examine them to find
the ones which best CORE
spond to your own psychology
and investment needs.
Risks and rewards-Buying
q resort hotel In Algeria or
building q race track In Bra
I'll might pay q higher rate
Of return II the project is
successful. However, these
risks are probably many
times greater than purchas-
ing q modern Washington
property. To get a higher re-
turn one usually takes
greater chances. Location Is
the most important guide to
risk in real estate. A build
ing in a good. improving
neighborhood will usually
rent faster and remain oc-
cupied longer with stronger
tenants. Age. type Of con-
struction. architecture. con-
dition of buildings. tenancy
and many other factors
should also be observed. Visit
the properties whenever pos
sible and observe them care
fully.
Cash distributions - Basil
cally there are four general
policies among syndicators:
Holding undeveloped ground
or low income properties
which produce no immediate
net cash flow; blowing back
most OF the cash flow from
properties to buy and i'm
prove real estate or pay off
mortgages; paying out to
shareholders a substantial
portion Of cash flow (real
estate investment trusts are
required by law to distribute
90 per cent Of their taxable
income), and engaging In
spectacular payout In excess
Of the cash flow. The last
brings short-term glamour.
but endangers the owners
equity.
DiversificatiOn-By having
different types Of properties
and different locations, the
risk is spread. However. d.
versification will not substi-
tute for sound judgement.
Leadership-Look carefully
at the real estate background
and integrity Of the men in
volved. Syndications bear the
personalities. attitudes and
goals OF their leaders.
Maintaining q market-An
economic downturn In the fu-
ture might require you TO sell
your interest. That same con-
dition might cause other
owners 10 sell. Don't get
locked into q syndication
that will not or cannot main
tain a future market.
Type Of investment-Dif-
ferent syndications concen-
trate on land speculation, or
Southwest redevelopment, or
remodeling large. older struc-
lures. on building new apart
ment houses or office build
ings, on buying new, attrac-
tive properties which are
completed and operating, OF
various combinations OF these
Invest carefully-Read al
the material you can get
Feel free 10 ask questions AND
seek additional information
Don't be rushed by fast-talk-
ing statesmen. Notice who are
the individual men that man.
age the group. Take the time
10 investigate all the points
above,