Good REIT for SWAN and income?

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Josh5000
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Good REIT for SWAN and income?

Post by Josh5000 »

All,

In REIT space, what are the best reliable SWAN for both safe income with good recession resistant since very few things are recession proof? I invest in the following O, OHI, and a little big of NSA.

Thanks,

Josh
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nisiprius
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Re: Good REIT for SWAN and income?

Post by nisiprius »

You should take the time to look over the Bogleheads' Investment Philosophy. You don't need to agree with it, and many who call themselves Bogleheads depart from it in one way or another, but you should at least understand where this forum is centered. The particular point here is:
Rather than trying to pick the specific stocks or sectors of the market that may outperform in the future, buy funds that are widely diversified, or even approximate the whole market.
Because we don't try to pick specific stocks, we would not advise choosing individual REITs, either.

You can diversify across the whole universe of REITS by investing in a REIT or real estate index fund, such as Vanguard's VTSLX (mutual fund) and VNQ (if you prefer an ETF), or Fidelity's FSRNX or FREL. That's a suggestion for investing specifically in REITs.

But "real estate" is only one of the eleven business sectors in the standard classification, and the Bogleheads' philosophy advises against picking specific sectors.

In the past--say before 2008!--it was common for "factor investors" to suggest holding a REIT index fund, i.e. overweighting REITs, with the idea that although they are a kind of stock, they are uncorrelated with and move somewhat independently with the stock market and can reduce portfolio risk through diversification. Support for this idea cooled after 2008-2009, REITS tanked worse than the rest of the stock market.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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DaveTH
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Re: Good REIT for SWAN and income?

Post by DaveTH »

The SWAN REITS often mentioned by Brad Thomas at Seeking Alpha include:

- NNN (National Retail)
- ADC (Agree Realty)
- VICI (Vici Properties)
- MAA (Mid America Apartment Communities)
- EPRT (Essential Properties)

These are not necessarily recommendations, so do your own research and due diligence to see if they may be a good fit for you.
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Josh5000
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Re: Good REIT for SWAN and income?

Post by Josh5000 »

DaveTH wrote: Sun Mar 03, 2024 8:22 am The SWAN REITS often mentioned by Brad Thomas at Seeking Alpha include:

- NNN (National Retail)
- ADC (Agree Realty)
- VICI (Vici Properties)
- MAA (Mid America Apartment Communities)
- EPRT (Essential Properties)

These are not necessarily recommendations, so do your own research and due diligence to see if they may be a good fit for you.
Thanks. O is just a overgrown version of ADC. I have some MAA as well. O was doing quite good until recently.

It's my 4th stool of retirement revenue stream and I want income investments in case either Social Security or pension won't be available after 2040. The income generated now can be reinvested since some REITs are unfairly depressed. In addition, REIT is my alternate to owning rental properties.
doobiedoo
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Re: Good REIT for SWAN and income?

Post by doobiedoo »

..
The "My %" column is the percentage of that stock in my portfolio.

Code: Select all

  My Income Stocks
Ticker Yield   My %
ARCC   9.2%    1.5%
GAIN   6.8%    1.1%    Note: 2023 special dividends boosted actual yield to 17%!
PG     2.3%    1.3%
JNJ    3.0%    0.9%
O      5.9%    0.2%
O is a REIT. ARCC and GAIN are BDCs.
I also get dividends from COST, V, MSFT, SP500, CB, CTAS, VIG, VDIGX, but I don't own them primarily for dividends.
Capster1
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Re: Good REIT for SWAN and income?

Post by Capster1 »

DaveTH wrote: Sun Mar 03, 2024 8:22 am The SWAN REITS often mentioned by Brad Thomas at Seeking Alpha include:

- NNN (National Retail)
- ADC (Agree Realty)
- VICI (Vici Properties)
- MAA (Mid America Apartment Communities)
- EPRT (Essential Properties)

These are not necessarily recommendations, so do your own research and due diligence to see if they may be a good fit for you.
He has also recommended MPW and many others with awful performance.
I can’t imagine buying an individual REIT for retirement income. The volatility and drawdowns are not worth it. Basically the opposite of safe.
Something like a Consumer staple or utility is safer IMO.
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Josh5000
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Anyone holding individual or REIT ETF for income?

Post by Josh5000 »

[I merged the OP’s follow-up thread into the existing discussion. OP, it is best to post updates and follow-up questions in your original thread so members have a complete picture of your situation and don’t reiterate advice that has already been provided. - moderator ClaycordJCA.]

With REIT being depressed in recent years and may potential regain their pre-2020 price premium, is anyone allocating some assets to it? If so, what are good ETFs if you are not into individual companies. I hold O in Roth for long term tax-free dividend and potential gain and Roll-Over IRA for tax-deferred dividend until I can convert it to Roth at time of retirement and lower income bracket.
investuntilimrich
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Re: Anyone holding individual or REIT ETF for income?

Post by investuntilimrich »

too much work thinking about it and tracking another fund, just ended up doing the total market and calling it a day.
doobiedoo
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Re: Anyone holding individual or REIT ETF for income?

Post by doobiedoo »

Same topic as this thread: "Good REIT for SWAN and income?" date Mar 4, 2024
viewtopic.php?t=425986
realclemsongrad
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Re: Good REIT for SWAN and income?

Post by realclemsongrad »

Josh5000 wrote: Sat Mar 02, 2024 3:58 pm All,

In REIT space, what are the best reliable SWAN for both safe income with good recession resistant since very few things are recession proof? I invest in the following O, OHI, and a little big of NSA.

Thanks,

Josh
Sorry for asking the basic question. Why not use VNQ?
gougou
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Re: Good REIT for SWAN and income?

Post by gougou »

Josh5000 wrote: Sat Mar 02, 2024 3:58 pm All,

In REIT space, what are the best reliable SWAN for both safe income with good recession resistant since very few things are recession proof? I invest in the following O, OHI, and a little big of NSA.

Thanks,

Josh
ONL is my favorite REIT right now. Spun off from O, unloved by the market and trading at an absurd discount to fair value. Tax-deferred dividend yielding 12% on current stock price and I believe the dividend can be maintained going forward.

About a third of ONL’s properties are encumbered by $350M worth of mortgages. The other 2/3 are mortgage free. Company has very little debt outside of the $350M mortgages. If we assume the encumbered properties are worth exactly $350M and the unencumbered properties are worth $700M, the current market cap of $190M is a steal.

With such a huge discount and long term leases on core properties it’s going to be recession-resistant. And I SWAN when I buy $700M worth of properties for $200M with experienced management.
The sillier the market’s behavior, the greater the opportunity for the business like investor.
loukycpa
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Re: Good REIT for SWAN and income?

Post by loukycpa »

The six largest apartment REITS would be a good choice for this. All are low leverage, high credit ratings, and low payout ratios in terms of FFO. There seems to be a bit of undersupply at the moment. Trading below NAV, yield a bit higher than 4%. No guarantee, but reasonable expectation your dividends would continue increasing a rate higher than inflation over the long term.
"The safe assumption for an investor is that over the next hundred years, the currency is going to zero." - Charlie Munger
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mrmass
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Re: Good REIT for SWAN and income?

Post by mrmass »

Don't forget about industrial REITS

PLD

Likely get better input over at https://seekingalpha.com/

They love their dividends over there.
Topic Author
Josh5000
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Re: Good REIT for SWAN and income?

Post by Josh5000 »

loukycpa wrote: Mon Apr 01, 2024 10:49 am The six largest apartment REITS would be a good choice for this. All are low leverage, high credit ratings, and low payout ratios in terms of FFO. There seems to be a bit of undersupply at the moment. Trading below NAV, yield a bit higher than 4%. No guarantee, but reasonable expectation your dividends would continue increasing a rate higher than inflation over the long term.
What are those? I know about Camden, Mid-Atlantic, and Avalon Bay but not familiar with the 6-shooter alluded to. Please share.
loukycpa
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Re: Good REIT for SWAN and income?

Post by loukycpa »

Josh5000 wrote: Mon Apr 01, 2024 7:18 pm
loukycpa wrote: Mon Apr 01, 2024 10:49 am The six largest apartment REITS would be a good choice for this. All are low leverage, high credit ratings, and low payout ratios in terms of FFO. There seems to be a bit of undersupply at the moment. Trading below NAV, yield a bit higher than 4%. No guarantee, but reasonable expectation your dividends would continue increasing a rate higher than inflation over the long term.
What are those? I know about Camden, Mid-Atlantic, and Avalon Bay but not familiar with the 6-shooter alluded to. Please share.
MAA, CPT, UDR, ESS, EQR, and AVB

The usual Boglehead caution here. I would not allocate a large portion of my portfolio to this (more than 5%). REITS, including apartment REITs, are already included in total market index funds.
"The safe assumption for an investor is that over the next hundred years, the currency is going to zero." - Charlie Munger
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Josh5000
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Re: Good REIT for SWAN and income?

Post by Josh5000 »

Thanks. I didn't know about UDR and ESS. I am counting on O to take off once interest rate starts to fall. The earning metrics are too good to ignore.

Someone suggested ONL earlier. ONL and MPW are borderline pink slip now so that was either cruel intention or comedy gold material.

REIT is never meant to be long term as the dividend isn't that high and taxed at ordinary income, which is 60% higher than the 15% qualifying dividend tax for me, and price appreciation isn't that great. It is cyclical hold for sure so I am banking on good later half of 2024 and potential great 2025, then I'll have to put stop loss orders in to preserve gain while continue to treat it like bond.
Dave55
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Re: Good REIT for SWAN and income?

Post by Dave55 »

iShares Residential & Multisector RE ETF - (symbol is REZ) holds all publicly traded apartment REITS and various medical property REITS.

Dave
"Reality always wins, your only job is to get in touch with it." Wilfred Bion
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Josh5000
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Re: Good REIT for SWAN and income?

Post by Josh5000 »

Dave55 wrote: Tue Apr 02, 2024 6:34 pm iShares Residential & Multisector RE ETF - (symbol is REZ) holds all publicly traded apartment REITS and various medical property REITS.

Dave
Thank you. I need to check if it holds MPW and how much. Apartment REITs are good as that is essential goods and services. Office REITs were the same until 3 years ago. Medical REITs were a darling until the government suggested to corporations that they could continue with sky-high billings while having an option to not pay rent.

I hold OHI and it could be 2x if it wasn't for the option of tenants to pay or not pay rent and for people to make a decent living collecting welfare and handouts instead of working.
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Josh5000
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Re: Good REIT for SWAN and income?

Post by Josh5000 »

I think I'll pass on REZ. I am way better off just cherry-picking its top holdings for both dividend and upside potential. 0.48% on AUM is very high for potentially lower performance than self-direct portfolio and no benefit of S&P 500.

Thanks for the name drop so I could verify their holdings.
Dave55
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Re: Good REIT for SWAN and income?

Post by Dave55 »

Josh5000 wrote: Tue Apr 02, 2024 6:45 pm I think I'll pass on REZ. I am way better off just cherry-picking its top holdings for both dividend and upside potential. 0.48% on AUM is very high for potentially lower performance than self-direct portfolio and no benefit of S&P 500.

Thanks for the name drop so I could verify their holdings.
Vanguard Total Market (VTI) has trounced REZ since Jan 2008.
VTI: 10.19% CAGR
REZ: 7.86% CAGR

Dave
"Reality always wins, your only job is to get in touch with it." Wilfred Bion
loukycpa
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Re: Good REIT for SWAN and income?

Post by loukycpa »

Josh5000 wrote: Tue Apr 02, 2024 6:27 pm Thanks. I didn't know about UDR and ESS. I am counting on O to take off once interest rate starts to fall. The earning metrics are too good to ignore.

Someone suggested ONL earlier. ONL and MPW are borderline pink slip now so that was either cruel intention or comedy gold material.

REIT is never meant to be long term as the dividend isn't that high and taxed at ordinary income, which is 60% higher than the 15% qualifying dividend tax for me, and price appreciation isn't that great. It is cyclical hold for sure so I am banking on good later half of 2024 and potential great 2025, then I'll have to put stop loss orders in to preserve gain while continue to treat it like bond.
I am not sure if this matters to you, but price appreciation and total return on REITs has been fine if you take a longer term view. For example, here is the 30 year return of the six largest apartment REITS I sent you compared to the total stock market index. You can see an equally weighted portfolio of these 6 apartment REITs have slightly outperformed VTI/VTSAX over the long-term.

https://www.portfoliovisualizer.com/bac ... qpgwk6hznW

Admittedly there could very well be some survivorship bias in that comparison. These are the largest publicly traded apartment REITs, so you could say these are the "winners".

You would have to be prepared for somewhat larger draw downs vs. VTI I think. 2008/2009 was ugly, but they recovered fine. To me volatility is not equal to risk. Personally I am more concerned about permanent loss of capital than volatility, but not everyone thinks that way. The risk of permanent loss of capital seems low to me if you are investing in conservatively managed apartment REITs and you are willing to hold through the cycles.

In terms of your tax rate, slight correction that because of the 20% QBI deduction your tax rate is actually 80% of your ordinary income rate.
"The safe assumption for an investor is that over the next hundred years, the currency is going to zero." - Charlie Munger
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Josh5000
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Re: Good REIT for SWAN and income?

Post by Josh5000 »

Dave55 wrote: Tue Apr 02, 2024 6:50 pm
Josh5000 wrote: Tue Apr 02, 2024 6:45 pm I think I'll pass on REZ. I am way better off just cherry-picking its top holdings for both dividend and upside potential. 0.48% on AUM is very high for potentially lower performance than self-direct portfolio and no benefit of S&P 500.

Thanks for the name drop so I could verify their holdings.
Vanguard Total Market (VTI) has trounced REZ since Jan 2008.
VTI: 10.19% CAGR
REZ: 7.86% CAGR

Dave
Thanks. Yeah, I saw that as well. I am passing on REZ but will take the top few good performers on discount to hold in Roth and Simple IRA.
Topic Author
Josh5000
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Re: Good REIT for SWAN and income?

Post by Josh5000 »

loukycpa wrote: Wed Apr 03, 2024 7:21 am
Josh5000 wrote: Tue Apr 02, 2024 6:27 pm Thanks. I didn't know about UDR and ESS. I am counting on O to take off once interest rate starts to fall. The earning metrics are too good to ignore.

Someone suggested ONL earlier. ONL and MPW are borderline pink slip now so that was either cruel intention or comedy gold material.

REIT is never meant to be long term as the dividend isn't that high and taxed at ordinary income, which is 60% higher than the 15% qualifying dividend tax for me, and price appreciation isn't that great. It is cyclical hold for sure so I am banking on good later half of 2024 and potential great 2025, then I'll have to put stop loss orders in to preserve gain while continue to treat it like bond.
I am not sure if this matters to you, but price appreciation and total return on REITs has been fine if you take a longer term view. For example, here is the 30 year return of the six largest apartment REITS I sent you compared to the total stock market index. You can see an equally weighted portfolio of these 6 apartment REITs have slightly outperformed VTI/VTSAX over the long-term.

https://www.portfoliovisualizer.com/bac ... qpgwk6hznW

Admittedly there could very well be some survivorship bias in that comparison. These are the largest publicly traded apartment REITs, so you could say these are the "winners".

You would have to be prepared for somewhat larger draw downs vs. VTI I think. 2008/2009 was ugly, but they recovered fine. To me volatility is not equal to risk. Personally I am more concerned about permanent loss of capital than volatility, but not everyone thinks that way. The risk of permanent loss of capital seems low to me if you are investing in conservatively managed apartment REITs and you are willing to hold through the cycles.

In terms of your tax rate, slight correction that because of the 20% QBI deduction your tax rate is actually 80% of your ordinary income rate.
Thank you so much for the link and explanation.

My goal with REIT is income generator even though I won't need it. I'll take the dividend and buy companies on sale or reinvest during sale period such as now.

For actual income that I may need, I am relying on MLPs in brokerage account so I'll take the tax-deferred distribution to spend if needed and pass-through the units. MLPs can be profitable short term gainer but definitely not ideal trading vehicles for those in 24% tax bracket or above. The first year of retirement maybe the best time to sell them. I need to calculate what would be my retirement income between pension and annuity, which we pay into automatically without option to opt out and it covers a portion amount that would be our SS until age 62. I also need to run the math of if I want to collect SS at 62 or use that year to start doing Roth conversion for my 401k.

Thank you again.
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