How is the value of BRXS Properties notes estimated in the interim?

The final value of a property is determined by the property’s eventual sale price in the distant future. In order for investors to track their investments over time, the interim value of a BRXS Properties note in a property is estimated at regular intervals. Also, if you want to sell your notes before the hold period of a property is up, you will have to sell it against the most current interim value of a note.

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This estimated value consists of: 

• Latest 3rd party estimate on Property Value:  The BRXS team uses 3rd party property value estimates, provided by Matrixian BV and other independent appraisal providers, to approximate the property’s current value.

• Current cash reserves: We look at the current cash reserves held by the property. These can have gone up and positively impact the BRXS note value, in periods where there was less maintenance or unforeseen costs. Or can have gone down and negatively impact the BRXS Properties note value, in periods where there was more maintenance or unforeseen costs than budgeted.

• Prorated closing costs and fees: The closing costs and offering fee are meant to be for the entire investment period of about 10 years. Accordingly, we account these costs so that the note price reflects only the prorated costs up to that time. In other words, those costs get gradually applied to investment value over the course of the entire period.‍

The estimated value divided by the number of BRXS Properties notes in that property then provides an updated estimate for the BRXS note value.

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Example of property that increased in value after 1 year:

A detailed description of each element can be found here.

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Example of property that decreased in value after 1 year:

A detailed description of each element can be found here.

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Few important things to consider:

1. The return on your investment consists of 2 parts: 

Besides potential appreciation, you are receiving a quarterly interest payout related to the rental income. Hence in order to determine your overall return, you need to take both into consideration.

2. Mortgage effect can have a positive or negative impact on note value

Not all of our properties have a mortgage and all of our recent properties do not have a mortgage. But for those that do have a mortgage, it is important to take into consideration the mortgage leverage effect: Mortgages will increase gains when the property valuation has gone up, but will also decrease losses when the property has gone down.

3. Diversification:

Not every city, neighbourhood and property will appreciate at the same rate in the same timeframe. Therefore it’s good to focus on building a diversified portfolio, and diversify across several properties so that you don’t have all your eggs in one basket.  

4. Time is a key element:

One of the biggest factors in appreciation is purely the amount of time. This makes sense – If you purchased a property last month, it’s unreasonable to think that the value of the underlying real estate has changed significantly.

Unlike the stock market, the real estate market doesn’t see big daily, weekly, or monthly swings. That lack of volatility is a huge reason that investors love real estate, particularly compared to the stock market. Therefore as an investor you should focus on the long term as the housing market tends to move slowly and steadily over the long term.

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