Are REITs a good investment?

Question

Has anyone had any luck with REITs? If so could you point me in the right direction? Thanks in advance.

Yuuj V. · Answer

I invest in REIT's. But full disclosure is I follow Financial Analysts from SeekingAlpha, The REIT Forum and High Yield Landlord. I highly recommend you understand what you're investing in before you invest in anything at all. REIT's are a great truly passive way to investing for dividends. But don't expect to be rich overnight, and there is no 'leveraging'. (Buying shares of a stock at a 20% down payment :P ) Although you can reinvest dividends through DRIP to buy fractions of a share.

I also invest with FundRise and RealtyMogul. I've been pretty happy with Fundrise, in it for a long term, (5 - 10 year hold). It helps diversify all my holdings, fee's can be somewhat 'large', but nothing I am not comfortable with. You need $500 to start with Fundrise and be able to invest a minimum of $100 after that. RealtyMogul you need $1000 and can only invest in minimums of $1000.

I chose FundRise cause I get K-1's. RM doesn't offer that, just 1099-DIV's.

*Always do your own research, plenty of articles on the two.

For REIT's on the stock exchange, their prices vary, and you're not getting rich tomorrow. It takes discipline and mindset. You need to commit to investing long term. If you lack large capital, go with the Real Estate Index Fund through your brokerage. I recommend Fidelity, just a happy customer, no minimums to buy into the fund compared to Vanguard and Schwab. ($3000 min).

Some REIT's that I have/am personally invested in: Simon Property Group (SPG), Invitation Homes (INVH), Macerich (MAC), VEREIT (VER), Avalon Bay Communities (AVB) to name a few. I am long these positions (5+ years). Of course if a recession hit tomorrow, I'd still be collecting dividends, but my shares would drop in price. (Buy low? Hold long?)

You have to ignore price of the share fluctuation. Stocks go up and down (volatility). But the underlying assets (Real Estate) and the company + management can be great and provide great returns long term through dividends. I just reinvest all my dividends and snowball my portfolio of REITS. I'm hovering at just under a 6% yield of the portfolio, getting rid of a few and consolidating others. I hope to generate 7% - 8% portfolio yield with good payout ratio's and long history of dividend increases.

REIT's are a great way to get exposure into real estate without buying real estate. You get the professional management of a company, diversified real estate across the nation, paid rent in the form of dividends, and can invest anywhere from Single Family (INVH) to Multi Family (AVB) to Commercial Real Estate (SPG) and Triple Net Leases (VER).

Yuuj V. · Answer

Inb4 the RENTALS GENERATE MORE CASHFLOWWWWWWW, LEVERAGEEEEEE and REITS ARE NOT REAL ESTATE!!!!

While I do agree that having a rental generates way more cash flow, the buy in is also high. for a $100,000 house, you need 20% down payment, closing costs, and rehab work. That can total $30,000. (rough example numbers, spare me the DIY, buy right, buy low, etc.

You will also be dealing with vacancies which will happen, property issues, broken fixtures and the 3 T's, Toilets, Trash and Tenants.

REIT's are truly passive, you buys in, collect dividends. Not all REIT's are equal, and you want to pay attention to dividend yield. (3.5%, 4%, 4.3%, etc). A $100 invested in a company that yields 5% yield is an quarterly payout of $1.25, or $5/year. But how much headache, heartache, late nights did you deal with? 0.

Here's a good article, Jussi is the author of High Yield Landlord. He's obviously biased, but still raises good valid points.

https://seekingalpha.com/article/4254004-rentals-vs-reits-best-way-invest-real-estate-practical-case-study?isDirectRoadblock=true

Nicholas Heinrich · Answer

i personally invest in a company called LTC it pays monthly dividends currently .19 a share. Financials are average. I make money really on just the dividends.

Brad Hines · Answer

I'm a professional equities and derivatives investor, and 100% of my real estate experience so far is in REITs. REITs are absolutely fantastic and should be owned by all of us, hands down. Even when I get into hard/physical direct-owned real estate, I will continue to parlay money for the rest of my life into the marvel that is REIT dividend investing. For anyone overwhelmed with the dizzying array of REITS, you can even buy an ETF of REITS, basically a bundle of all the major REITs, to be involved in all classes of real estate, even things as specific as billboards and senior living centers.

Brad Hines · Answer

Ps. Anyone claiming REITs aren't real estate are peddling a myth. While you can't go walk the properties and be involved with management (although you can vote through shares) when you own REITS, what you own through the stock you bought, IS equity in real estate, so it's actually owning real estate yes.

Account Closed · Answer

Most everybody here is "hands on" or finance related. It is likely few if any here have experience with REITS.

Henry Lazerow · Answer

Old topic but I invest in REITS as well as real property. It's a nice combo. The downside is REITs closely follow general market. I would never want too much money in REITs due to market risks. With real property you can do a value add or find a good deal and have a lot more control over profits.

I invested in REITs heavily off Seeking Alpha advice and have done very well. Great site to follow just also do your own due diligence.

Yuuj V. · Answer

Last section ---

Are REIT's good investments?

The real question is, what is your investment goal? What do you hope to achieve? Why are you interested in REIT's?

My investment goals are to build a portfolio that generates dividends that I can eventually live off of. I am interested in REIT's because of the tax breaks, it's exposure to Real Estate and it's not speculative investments (Crypto, Facebook, Amazon, etc). I invest only to receive a return, not invest and wait for the return when I sell (nothing wrong with that). Buy and Hold mentality, while collecting returns.

Are REITs a good investment?

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