dividends

How Landa Calculates Dividends

Understanding Landa's Dividend Calculation

Investing in real estate through Landa offers the unique benefit of earning monthly dividend payments. But how do we determine these dividends? Let's break it down.

Property Dividend Calculation

We derive the dividend from the property's net income: the total rent we collect minus any loans, reserves, and other expenses. It's a similar concept to the dividends you'd get from public company stocks.

Dividend Terms and Definitions:

  • Fixed Expenses: These are the consistent costs associated with a property and include mortgage interest payment, HOA fees, insurance, management fees...
  • Monthly Reserve Balance: Set at 7% of the expected rent, this reserve is a safety net to cover unforeseen expenses or rent collection shortfalls.
  • Variable Expenses: These are expenses that aren't consistent month-to-month, essentially any cost that doesn't fall under 'Fixed Expenses'.
  • Minimum Property Account Balance: This balance is equivalent to one month's rent, ensuring a buffer for the property's financial health.

Property dividends are capped at 30% of the expected monthly rent. Why? We want to ensure that our properties stay financially robust, covering their expenses without any risk of default. By doing this, we aim to provide investors with steadier monthly dividends over time. However, if a property has a balance significantly above the minimum account balance and meets other criteria (like a strong collection rate and low variable expenses), we reserve the right to increase this cap. This is all in an effort to ensure dividends are calculated in a way that truly represent the property's full potential.

Property Dividend Per Share

The Dividend Per Share is determined by dividing the total property dividend by the number of shares existing for that property at the start of the month. This rate can be dynamic, especially for properties in their IPO phase. As shares are acquired, the Dividend Per Share may change.

Dividend Distribution: The How and Why

Dividend Distribution Mechanism

Dividends paid to investors are based on the settlement date of each transaction. This ensures that the dividends you see in the app accurately mirror the number of shares outstanding in each property, providing a true representation of ownership.

Importance of the Settlement Date

Using the settlement date offers a transparent and precise count of shares because it showcases finalized purchases for each property. This ensures fair treatment for all investors, aligning dividends with ownership stakes.

For instance, if your dividends-per-share are $0.2364 for 15 shares, you'd get a dividend of $3.54. Any fractional cents, like $0.006 in this case, roll over to your next dividend payment. This ensures that no value is lost over time.

Implications for Investors

Remember, if you invest in a property, the displayed dividends in the app are linked to the settlement date of your transaction. This can influence the dividends you get from a property.

Your First Dividend: What to Expect

For your initial dividend, it's prorated based on when you share/s settled. So, if your shares settled mid-month, you'd get half of that month's dividend per share. This proration begins from the order's settlement date.

Understanding Property Tax Payments

In the past, we reserved a specific monthly amount in the dividend breakdown, anticipating future tax payments. But, we've updated our approach. Now, we accumulate these funds in the property account over the year. When it's time, we make a one-time annual payment to the county for the property's annual taxes. So, within the app, you'll now notice these tax payments being made once a year, straight from the property account balance.