Distributions: what reaches you, and in what order

A distribution is what is left of an asset's cash after everything with a prior claim has been paid. The word makes it sound like a scheduled salary. It is closer to a residue, and understanding the order of the queue tells you more about a projection than the projection does.

The queue, in order

Rent is collected. Out of it come the operating costs of the property — management, maintenance, insurance, municipal charges during voids, building committee fees. Then interest and any capital repayment on borrowed money, which is contractual and does not wait. Then the reserve is topped up. Then vehicle-level costs: administration, accounting, audit, the platform's own fees. What survives all of that is available to distribute, and it is divided according to whatever split the documents set out.

Why a reserve is a feature, not a leak

A reserve looks like money being withheld from you, and in the short run it is. It is also the only thing standing between one broken boiler and a suspended distribution. A vehicle with a thin reserve produces a higher payout in good quarters and a more fragile one in bad quarters. When comparing two opportunities, a lower distribution with a properly funded reserve is not obviously the worse deal.

Return on your money and return of your money

These are different and are frequently presented identically. A payment funded by rent is a return on your capital: the asset earned it. A payment funded by sale proceeds, by a refinancing, or out of the money that was raised in the first place is a return of capital — your own money, coming back. Both arrive in the same bank account and look the same on a statement. Ask which is which, because only one of them is income.

Timing, and the pre-build case

Frequency is a policy decision, not a law of nature: quarterly, semi-annual and annual are all common, and a first payment usually comes later than people expect because a property has to be bought, let and stabilised first. On an asset that is still being built the answer is starker — a building under construction has no tenants, so the rental component is zero until handover. Any projection showing rent from year one on a pre-build asset is describing something other than rent.

Why they are not promises

Every input above can move. A tenant leaves and the void runs longer than modelled. A repair turns out to be structural. A variable interest rate resets upward and consumes the cash that would have been distributed. A lender's terms require cash to be retained. A local tax or levy changes. None of these are exotic; they are the ordinary weather of owning property, and a projection is a description of one path through it, not a commitment.

Tax does not wait for the distribution

Amounts may be taxed at the level of the vehicle, at the level of the holder, or both, and the treatment depends on the structure and on your own circumstances and residency. The figure that matters to you is the one after tax, and it is not the figure on the page. This is one of the questions where general reading has to give way to personal advice.

How to read a distribution figure

• Is it stated per year, or in total across the hold period?
• Is it before or after fees, and before or after tax?
• What proportion is rent, and what proportion depends on a sale?
• When does the first payment actually arrive, and on what conditions?
• What happens to it in a year when the property is empty for a quarter?

If a page cannot answer these questions, it has not told you what it is offering.