I'm looking at the cover sheet for a potential investment, and I see something like this:

Projected average cash yield is 8%. Projected yield per annum 12%.

What is the difference between "projected average cash yield" and "projected yield per annum?" I would have thought that they were the same thing, until I saw them together like this.

  • Cash yield sounds like a dividend, and projected yield per annum like capital appreciation or dividend + appreciation. What kind of investment? – RonJohn Aug 2 '19 at 18:24
  • @RonJohn It's basically a private REIT, looks like they're raising funds for an apartment building/complex. – Jim Fell Aug 2 '19 at 18:25
  • PACY doesn't take depreciation into account. – RonJohn Aug 2 '19 at 18:38

REITs must distribute 90% of their taxable income to shareholders. For this REIT that seems to be an 8% dividend ("cash yield") on average.

The overall growth of the REIT, which includes both capital appreciation (increase in property values) and income (rents/leases) is expected to be 12% per year on average. If you reinvest the dividends back into the REIT (which is common if your broker offers that), then you can expect a 12% return on average. Like stocks, though, returns for REITs fluctuate, so the returns will be more or less than that each year.


I suppose the REIT for some reason believes their properties appreciate at a rate of 4%, giving 8% + 4% = 12% projected yield per annum.

However, actually properties do depreciate and not appreciate. A reasonable depreciation rate for properties is -2%. To maintain the real value of your investment, the REIT needs to invest into repairs at about 2% per year rate.

So, I would project you to have 8% cash yield (if we can believe that, because it sounds too high), 2% inflation and -2% depreciation, giving a total yield of 8%.

However, I don't really believe the 8% cash yield is reasonable. Where I live, properties yield more like 4-5%. That would give 4-5% total yield.

TL;DR: there are better investment opportunities than this. If you nevertheless invest into this, keep in mind that a single investment should be at most few percent of your portfolio.

  • Regarding high yields: they sometime express yield in terms of the original unit price, with subsequent units in the investment sold at a higher unit price. – Lawrence Aug 3 '19 at 17:39

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