REIT or No REIT

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tj
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Re: REIT or No REIT

Post by tj » Mon Dec 25, 2017 5:52 pm

I don't like the REIT Index because it's so heavy on shopping malls and things of that nature. I buy very few things in actual stores. That being said, when I go to the mall, it's always packed?


I like the idea of investing in actual apartment complexes.

This can easily be done with a custom Motif....I haven't personally invested in one though.

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abuss368
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Re: REIT or No REIT

Post by abuss368 » Mon Dec 25, 2017 7:18 pm

fmhealth wrote:
Mon Dec 25, 2017 5:26 pm
It appears that the new tax plan will actually have a very favorable impact on REITS.

https://seekingalpha.com/article/413351 ... form?ifp=0
This was my understanding as well. The historical thinking on REITs May need an update. You should start another thread.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Re: REIT or No REIT

Post by Ged » Mon Dec 25, 2017 7:30 pm

livesoft wrote:
Fri Dec 22, 2017 10:59 am
My case: REITs are bad investments in a rising interest rate environment since they run on borrowed money. REITs are volatile. If they drop significantly, then that will be the time to buy them, but be prepared to sell them if they go up quickly, too. If there is a 20% correction, then there will be so many other buying opportunities besides REITs.

Simply put: I think there are better opportunities elsewhere at this time.
I agree. My experience with REITs is their volatility makes them a good purchase for rebalancing into equities in a down market and a good thing to sell in favor of bonds when the market is going up.

Now is not the time to hold REITs.

PFInterest
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Re: REIT or No REIT

Post by PFInterest » Mon Dec 25, 2017 10:20 pm

No REIT.

Agggm
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Re: REIT or No REIT

Post by Agggm » Mon Dec 25, 2017 11:06 pm

hdas wrote:
Fri Dec 22, 2017 8:48 am
I'm helping my brother with his long term investing. He does not have access to a tax-advantaged account at the moment. Perhaps in 2-3 years but still uncertain. The allocation I would like for him is:

80% Stocks (US, Dev-Ex US, EM)
10% Reits (US, International)
10% US long term bonds

The Question is: Is the tax drag of REIT such (25% bracket), that it would be preferable to allocate 90% Stocks 10% Bonds instead or 100% Stocks?

In other words...if a person doesn't have a tax advantaged account, should this person not diversify to REIT's at all based on tax efficiency considerations?

Thanks,
Probably best to put reits (if you must overweight this sector) in a tax advantaged account.

SlowMovingInvestor
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Re: REIT or No REIT

Post by SlowMovingInvestor » Mon Dec 25, 2017 11:17 pm

fmhealth wrote:
Mon Dec 25, 2017 5:26 pm
It appears that the new tax plan will actually have a very favorable impact on REITS.

https://seekingalpha.com/article/413351 ... form?ifp=0
Does this favorable tax treatment also hold for REIT mutual funds ? What about international REIT mutual funds (like VNQI) ?

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Re: REIT or No REIT

Post by birdog » Tue Dec 26, 2017 6:12 am

No REIT

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Re: REIT or No REIT

Post by oldcomputerguy » Tue Dec 26, 2017 8:19 am

fmhealth wrote:
Mon Dec 25, 2017 5:26 pm
It appears that the new tax plan will actually have a very favorable impact on REITS.

https://seekingalpha.com/article/413351 ... form?ifp=0
But I can’t help but wonder, hasn’t the market already seen that and factored it in?
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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abuss368
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Re: REIT or No REIT

Post by abuss368 » Tue Dec 26, 2017 9:25 am

oldcomputerguy wrote:
Tue Dec 26, 2017 8:19 am
fmhealth wrote:
Mon Dec 25, 2017 5:26 pm
It appears that the new tax plan will actually have a very favorable impact on REITS.

https://seekingalpha.com/article/413351 ... form?ifp=0
But I can’t help but wonder, hasn’t the market already seen that and factored it in?
I have to imagine with how fast the tax reform bill moved that perhaps many of the specifics have not been analyzed just yet.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Re: REIT or No REIT

Post by sschoe2 » Tue Dec 26, 2017 10:32 am

I have a decent exposure from my small cap fund which is sufficient for myself.

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Re: REIT or No REIT

Post by livesoft » Fri Jan 12, 2018 5:07 pm

Another 52-week low for VNQ was reached today. Bottom is not in my sights.
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iceport
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Re: REIT or No REIT

Post by iceport » Fri Jan 12, 2018 6:35 pm

livesoft wrote:
Fri Jan 12, 2018 5:07 pm
Another 52-week low for VNQ was reached today. Bottom is not in my sights.
My US REIT allocation is ~10% below its target, but the re-balancing band is 20% in either direction. Meanwhile, international real estate is ~5% above its target. Over the 52-week period, VNQI has diverged markedly from US REITs. (I wonder how much of that outperformance is attributable to currency fluctuations alone...)

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
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dfonley
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Re: REIT or No REIT

Post by dfonley » Fri Jan 12, 2018 7:09 pm

I have 34 shares of VNQ should I sell or hold?

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samsoes
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Re: REIT or No REIT

Post by samsoes » Fri Jan 12, 2018 7:14 pm

dfonley: (sorry, forgot to hit the quote function)

Ditch 'em. I've stopped re-balancing into REITS in my Roth and TIRA. Their percentage of my portfolio is dwindling. I have long since ditched them from taxable. They really complicated things at tax time (Sec 1250 Recap, return of capital, amended statements and from brokerage and 1040X filings due to REIT updates, horribly tax inefficient etc.)

Having 34 is a small enough number to just make them go away.
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Re: REIT or No REIT

Post by mikep » Fri Jan 12, 2018 7:44 pm

What a coincidence it is near a 52 week low and most want to get rid of them.

Here's a different opinion when they were booming:
viewtopic.php?t=52866

Stay the course, folks. If they were good back then they are still good now.

I am rebalancing in since that's what my IPS says to do.

MikeMak27
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Re: REIT or No REIT

Post by MikeMak27 » Fri Jan 12, 2018 7:56 pm

mikep wrote:
Fri Jan 12, 2018 7:44 pm
What a coincidence it is near a 52 week low and most want to get rid of them.

Here's a different opinion when they were booming:
viewtopic.php?t=52866

Stay the course, folks. If they were good back then they are still good now.

I am rebalancing in since that's what my IPS says to do.
I couldn’t agree more. When I first started coming to this site, REITS were all the rage. Everybody was recommending 10-15% of their portfolio towards them. Well, now that they’ve underperformed stocks for a bit, everyone is trashing them. It’s like a dumpster fire here with the recent sell off since December. If your IPS calls for REITS, now is the time to make sure your portfolio is in balance. Buy low sell high right ;)
Mac 4 fund portfolio: 45% US small cap value (IJS, VBR), 40% Emerging Markets (IEMG, VWO, FPMAX), 10% long term US treasuries (TLT), 5% US REITS (VNQ)

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Re: REIT or No REIT

Post by staythecourse » Fri Jan 12, 2018 7:56 pm

livesoft wrote:
Fri Dec 22, 2017 10:59 am
My case: REITs are bad investments in a rising interest rate environment since they run on borrowed money.
I wish this urban legend would just die. I believe the data shows there is NO correlation between interest rates and REIT performance.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

staythecourse
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Re: REIT or No REIT

Post by staythecourse » Fri Jan 12, 2018 7:57 pm

MikeMak27 wrote:
Fri Jan 12, 2018 7:56 pm
mikep wrote:
Fri Jan 12, 2018 7:44 pm
What a coincidence it is near a 52 week low and most want to get rid of them.

Here's a different opinion when they were booming:
viewtopic.php?t=52866

Stay the course, folks. If they were good back then they are still good now.

I am rebalancing in since that's what my IPS says to do.
I couldn’t agree more. When I first started coming to this site, REITS were all the rage. Everybody was recommending 10-15% of their portfolio towards them. Well, now that they’ve underperformed stocks for a bit, everyone is trashing them. It’s like a dumpster fire here with the recent sell off since December. If your IPS calls for REITS, now is the time to make sure your portfolio is in balance. Buy low sell high right ;)
Agreed.

I am quite disappointed at all the market timing advice given on this thread alone. If you have a place for REITS in your STATIC asset allocation just keep trucking along. If you don't don't invest in it. Simple as that. There is no, "Well I think....".

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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abuss368
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Re: REIT or No REIT

Post by abuss368 » Fri Jan 12, 2018 9:56 pm

mikep wrote:
Fri Jan 12, 2018 7:44 pm
What a coincidence it is near a 52 week low and most want to get rid of them.

Here's a different opinion when they were booming:
viewtopic.php?t=52866

Stay the course, folks. If they were good back then they are still good now.

I am rebalancing in since that's what my IPS says to do.
Exactly! I have been rebalancing and buying.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

drummerboy
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Re: REIT or No REIT

Post by drummerboy » Fri Jan 12, 2018 10:25 pm

Consider Global REITs instead. Domestic funds have too high a concentration in Simon PG and Equinix.

SFREX has raised my curiousty. http://www.morningstar.com/funds/xnas/sfrex/quote.html

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cfs
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Re: REIT or No REIT

Post by cfs » Fri Jan 12, 2018 10:31 pm

I hold none, individually. I let the managers of my low cost mutual funds pick the REITs for me, I pay them a couple of bucks to make good decisions. Good luck, and thanks for reading ~cfs~
~ Member of the Active Retired Force since 2014 ~

Pharm91
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Re: REIT or No REIT

Post by Pharm91 » Fri Jan 12, 2018 10:38 pm

Valuethinker wrote:
Fri Dec 22, 2017 9:21 am
hdas wrote:
Fri Dec 22, 2017 8:48 am
I'm helping my brother with his long term investing. He does not have access to a tax-advantaged account at the moment. Perhaps in 2-3 years but still uncertain. The allocation I would like for him is:

80% Stocks (US, Dev-Ex US, EM)
10% Reits (US, International)
10% US long term bonds

The Question is: Is the tax drag of REIT such (25% bracket), that it would be preferable to allocate 90% Stocks 10% Bonds instead or 100% Stocks?

In other words...if a person doesn't have a tax advantaged account, should this person not diversify to REIT's at all based on tax efficiency considerations?

Thanks,
I would avoid REITs for the tax drag reasons.

REITs are not a bond substitute in any case. They are a form of equity. During the financial crash, the REIT index fell by much more than the Total Stock Market.

We don't know the age of your brother nor his financial position.

I would suggest that all investors should be 20% in bonds, as a minimum. This to stiffen the nerve during the inevitable bear markets (which can be long, and brutal**) and also to provide ammunition for rebalancing into a falling equity market.

What I see now is behavioural-- overweighting the recent past experience. Investors are constantly increasing their equity weightings, responding to the fact that markets have nearly x3 since the bottom in March 2009.

The longer history of stock markets suggests returns will be much lower. And, markets don't usually stagnate at low returns. Instead, they have sequences of negative returns and positive returns.

The fact that when I suggest stocks might return 5% pa for the next 10 years*, the furious responses that triggers from here, a relatively informed audience, suggest just how embedded we have become with the psychology of a bull market.

What tends to happen is those with very high equity weightings find themselves becoming more risk averse, and loss averse, as the markets fall. Thus they cut equity weightings. Taking more loss than necessary on the downside, and losing on the upside.


* we'd actually be lucky.

** the Federal Reserve cannot spark another stock rally by cutting interest rates from 5% and engaging in Quantitative Easing, if interest rates are near zero, as they are now. So the short, severe bear market of 2008-09 is relatively unusual.
Just a reminder that Real estate was the cause for the most recent market collapse. The most recent recession narrowed the gap of Beta of reits to the s&p500. Once investors realized corporate real estate earnings were not effected as much as predicted the sector rebounded nicely.

Pharm91
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Re: REIT or No REIT

Post by Pharm91 » Fri Jan 12, 2018 10:41 pm

abuss368 wrote:
Fri Jan 12, 2018 9:56 pm
mikep wrote:
Fri Jan 12, 2018 7:44 pm
What a coincidence it is near a 52 week low and most want to get rid of them.

Here's a different opinion when they were booming:
viewtopic.php?t=52866

Stay the course, folks. If they were good back then they are still good now.

I am rebalancing in since that's what my IPS says to do.
Exactly! I have been rebalancing and buying.
Not in taxable. But my buy price is <25.50 for vgsix. Giving a dividend of roughly 4.3%. I think we'll get there and maybe into the 24.xx range.

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Re: REIT or No REIT

Post by SJCX » Sat Jan 13, 2018 7:18 am

Me and my wife max out 401ks and contribute a large amount annually to a taxable account. I put a large portion of our Roth IRA contributions into Vanguard REIT ETF(VNQ). Diversification, passive income and tax free dividends

matthewmon
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Re: REIT or No REIT

Post by matthewmon » Sat Jan 13, 2018 7:43 am

I am buying healthcare reits HCN & VTR right now (10% of portfolio) at close to 6% dividend yield...with the population aging for the next 20+ years seems pretty safe since I plan to hold that long or longer.

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Re: REIT or No REIT

Post by StormShadow » Sat Jan 13, 2018 10:04 pm

hdas wrote:
Fri Dec 22, 2017 8:48 am
I'm helping my brother with his long term investing. He does not have access to a tax-advantaged account at the moment. Perhaps in 2-3 years but still uncertain. The allocation I would like for him is:

80% Stocks (US, Dev-Ex US, EM)
10% Reits (US, International)
10% US long term bonds

The Question is: Is the tax drag of REIT such (25% bracket), that it would be preferable to allocate 90% Stocks 10% Bonds instead or 100% Stocks?

In other words...if a person doesn't have a tax advantaged account, should this person not diversify to REIT's at all based on tax efficiency considerations?

Thanks,
I wouldn't invest in REIT's in a taxable account. But, why can't he contribute to an IRA? Assuming he has income, he should be eligible to start one.

Personally, I do invest in REIT's and hold all of it in my IRA accounts. Represents about 10% of my equity investments, and has done well for me.

Valuethinker
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Re: REIT or No REIT

Post by Valuethinker » Sun Jan 14, 2018 8:27 am

Pharm91 wrote:
Fri Jan 12, 2018 10:38 pm
Valuethinker wrote:
Fri Dec 22, 2017 9:21 am
hdas wrote:
Fri Dec 22, 2017 8:48 am
I'm helping my brother with his long term investing. He does not have access to a tax-advantaged account at the moment. Perhaps in 2-3 years but still uncertain. The allocation I would like for him is:

80% Stocks (US, Dev-Ex US, EM)
10% Reits (US, International)
10% US long term bonds

The Question is: Is the tax drag of REIT such (25% bracket), that it would be preferable to allocate 90% Stocks 10% Bonds instead or 100% Stocks?

In other words...if a person doesn't have a tax advantaged account, should this person not diversify to REIT's at all based on tax efficiency considerations?

Thanks,
I would avoid REITs for the tax drag reasons.

REITs are not a bond substitute in any case. They are a form of equity. During the financial crash, the REIT index fell by much more than the Total Stock Market.
Just a reminder that Real estate was the cause for the most recent market collapse.
Yes, an overvalued US housing market collapsing, and associated financial follies (CDOs, CDS etc.) was the proximate cause of the stock market collapse. There was also a significant international dimension-- Ireland, Iceland, UK financial institutions- -the causes were not all the US housing market collapse.
The most recent recession narrowed the gap of Beta of reits to the s&p500.
I think that statement risks blurring cause and effect. Real estate is always risky in a recession because the drivers of real estate demand (basically employment & consumer spending growth - GDP growth, crudely) are part of what goes down in a recession.

Beta is a number we calculate out of past behaviour. If you said "the correlation between REITs & the market increased" that's probably statistically more correct, or at least clearer?

However there are a couple of issues with the historic REIT data:

- valuation matters. REITs were very undervalued in 2000 (the value effect) and thus outperformed hugely in the 2000-03 recession. But that was an unusual recession, not caused by Fed tightening (although the bubble that preceded it was partly caused by Greenspan pursuing loose monetary policy)

If you have a time series, but there's an underlying trend in that time series (the correction of the undervaluation of REITs since the late 1990s) then that's going to have an impact on your observed correlations with another variable (the stock market as a whole).

- the REIT sector has increased massively in terms of market capitalization since the late 1980s. Harder to make assertions about it as the data goes back in time.
Once investors realized corporate real estate earnings were not effected as much as predicted the sector rebounded nicely.
Again correlation with common underlying factors:

- the radical monetary policy measures pursued by the Federal Reserve and other Central Banks (near zero interest rates + QE) made any bond-like investment attractive -- and commercial leases are bond-like.

- the recession, although brutal, was short, in response to fiscal stimulus in 2009-10 (again, globally) and monetary policy (above).

We can't assume commercial RE would recover so quickly in the next recession. It has not in Japan. It is perfectly possible for the sector to get overvalued, or overbuilt, and then go into a long slump.

An additional factor is changes in technology and the economy which are increasing the obsolescence of CRE assets. That's most noticeable in American retail (empty shopping malls associated with the decline of department stores; Sam's Club stores being abruptly closed & some turned into distribution centres) and it's getting worse.

But also new flexible ways of working are making the corporate demand for office space smaller, and more flexible with the economic cycle.

Conclusions

- Commercial RE is driven by a number of financial factors, as well as real economy ones. The REIT sector responds to both.

- we can't assert that REITs will do better in the next recession than the last one. We don't know. And we don't know what will cause the next recession.

- these things are stocks. The underlying asset has some nice bond-like characteristics, and if inflation picks up it will have a greater correlation with inflation than the stock market as a whole (at least in theory). But fundamentally they are equities, with equity risk.

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Re: REIT or No REIT

Post by Cpadave » Sun Jan 14, 2018 10:10 am

Reits are always misunderstood. I have about 6% of my assets in REITs. I hold them as long term investment for income and asset diversification. They are not like bonds (IMO they are better). I hold them in my taxable account as they provide some tax free income (depreciation and the new tax act). I remember in one study the REITs index performed as well or a little better than S&P. I select my own REITs rather than buying a ETF or Fund. Currently I switched most of the REITs into residential REits like AIV, MAA, etc. As long as the economic fundamentals (job market, unemployment rate) are strong, I am not worried for inflation or higher interest rate.

When I said that REITS are misunderstood, I mean most investors think that higher interest and inflation is always bad for REITs. I think in fact they positive for residential REIts. With higher inflation, their assets are worth more and with residential REits, they can adjust rents higher fast as their leases are generally 1-2 years long. Finally, with the new tax act, more people might consider to rent as tax advantage of owning a house has been decreased.

tj
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Re: REIT or No REIT

Post by tj » Sun Jan 14, 2018 11:17 am

Cpadave wrote:
Sun Jan 14, 2018 10:10 am
Reits are always misunderstood. I have about 6% of my assets in REITs. I hold them as long term investment for income and asset diversification. They are not like bonds (IMO they are better). I hold them in my taxable account as they provide some tax free income (depreciation and the new tax act). I remember in one study the REITs index performed as well or a little better than S&P. I select my own REITs rather than buying a ETF or Fund. Currently I switched most of the REITs into residential REits like AIV, MAA, etc. As long as the economic fundamentals (job market, unemployment rate) are strong, I am not worried for inflation or higher interest rate.

When I said that REITS are misunderstood, I mean most investors think that higher interest and inflation is always bad for REITs. I think in fact they positive for residential REIts. With higher inflation, their assets are worth more and with residential REits, they can adjust rents higher fast as their leases are generally 1-2 years long. Finally, with the new tax act, more people might consider to rent as tax advantage of owning a house has been decreased.

I thought residential REIT's made a lot of sense too. Those private REIT's like FundRise are so popular, but why wouldn't you just buy AvalonBay or EquityResidential if you are looking to own a bunch of apartments?

Cpadave
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Re: REIT or No REIT

Post by Cpadave » Sun Jan 14, 2018 11:32 am

I would not but any private reits. Don't trust them. I own AIV, MAA, EQR, IRT atm. Might consider avalon after more research.

SlowMovingInvestor
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Re: REIT or No REIT

Post by SlowMovingInvestor » Sun Jan 14, 2018 11:40 am

I feel that you can get a lot of exposure to all but the residential real estate sector just through a broad market index. And if commercial REITs fall because of online shopping, stocks like Amazon will rise to compensaate for that.

But I do think the residential real esate sector (especially single family homes) is not captured in a broad market index (not even through homebuilders, mortgage companies, and stores like HD and Lowes). So I think buying some residential REITs makes sense. In particular REITs like INVH (which focuses on single family homes).

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Re: REIT or No REIT

Post by Valuethinker » Sun Jan 14, 2018 1:26 pm

SlowMovingInvestor wrote:
Sun Jan 14, 2018 11:40 am
I feel that you can get a lot of exposure to all but the residential real estate sector just through a broad market index. And if commercial REITs fall because of online shopping, stocks like Amazon will rise to compensaate for that.

But I do think the residential real esate sector (especially single family homes) is not captured in a broad market index (not even through homebuilders, mortgage companies, and stores like HD and Lowes). So I think buying some residential REITs makes sense. In particular REITs like INVH (which focuses on single family homes).
It's worth a read what Sam Zell said about the SFH REITs.

Private equity firms like Blackstone swooped in in the dark days of 2009-11 and bought up large numbers of distressed homes. It was a valuation anomaly, and that's how they make their money.

Subsequently, to get exit liquidity for their funds, they IPO'd them.

I think though we have to question the subsector, as opposed to apartment REITs which have been around for decades:

- SFH have generally higher maintenance costs (more external walls and windows per unit floor space)
- the properties will now be aging (many were built in the 2003-06 real estate boom) and thus more expensive to maintain, need periodic renewal etc
- management is more expensive because you don't get the same locational efficiencies that you do with a large apartment building or complex. Also these are suburban locations which further spreads them out
- SFHs are larger -that either caters to families (who prefer to buy, if they can; tax act may change that, but I suspect only at the margin) or you get multiple occupants (ugghh, is all I can say, if you've ever rented to students or young working people etc.)
- there has been a shortage of SFHs (to buy) and thus both higher values for (rental) ones owned, and higher rental demand. Normally in American history, that supply-demand imbalance corrects itself. You won't likely get continuing capital appreciation (and perhaps rental growth) of the post Crash recovery period.


It is one to watch, and the valuations may be correspondingly attractive. But Zell's point was that no one had made this work, before, and these vehicles were created by newcomers to the rental industry.

I would not take on too much single stock risk in any case. You are exposing yourself to the risk that a particular management team, company or portfolio of buildings goes wrong. e.g. they might leverage up and then wind up in Chapter 11.

Valuethinker
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Re: REIT or No REIT

Post by Valuethinker » Sun Jan 14, 2018 1:28 pm

Cpadave wrote:
Sun Jan 14, 2018 11:32 am
I would not but any private reits. Don't trust them. I own AIV, MAA, EQR, IRT atm. Might consider avalon after more research.
That's pretty much the BH consensus, I think.

Lots of horror stories here by people who got suckered into them by financial advisers, are now trying to get out (that can take decades).

Management teams of REITs allied with shareholder interests will tend to IPO them. They stay private if they don't want the higher levels of disclosure and governance applied to public stocks.

David Swensen also has a couple of pages in his book about the horrors of private REITs. And there was a website "REIT Wrecks".

tj
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Re: REIT or No REIT

Post by tj » Sun Jan 14, 2018 4:03 pm

Cpadave wrote:
Sun Jan 14, 2018 11:32 am
I would not but any private reits. Don't trust them. I own AIV, MAA, EQR, IRT atm. Might consider avalon after more research.
Also look into ESS, CPT and UDR...

FWIW, IRT is a very tiny % of the market cap of apartment REIT's. Like less than 1% the last time I looked.

You might also consider EDR and ACC both of which invests in apartments near college campuses. Basically overflow dorms.
Last edited by tj on Sun Jan 14, 2018 4:46 pm, edited 1 time in total.

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Re: REIT or No REIT

Post by tj » Sun Jan 14, 2018 4:12 pm

SlowMovingInvestor wrote:
Sun Jan 14, 2018 11:40 am
I feel that you can get a lot of exposure to all but the residential real estate sector just through a broad market index. And if commercial REITs fall because of online shopping, stocks like Amazon will rise to compensaate for that.

But I do think the residential real esate sector (especially single family homes) is not captured in a broad market index (not even through homebuilders, mortgage companies, and stores like HD and Lowes). So I think buying some residential REITs makes sense. In particular REITs like INVH (which focuses on single family homes).
AMH has the same focus. I would feel more comfortable with the apartment REITs than the single family REIT's, but I guess either would get you that exposure you're looking for.

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Alexa9
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Re: REIT or No REIT

Post by Alexa9 » Sun Jan 14, 2018 4:14 pm

Total Stock Market has enough REITs for me. I see no reason to overweight it.

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Re: REIT or No REIT

Post by Boston Barry » Fri Feb 09, 2018 1:00 am

Should I rebalance into VGSLX (Vanguard US REIT) now? Yield up to 4.42%. LOL I bought it a year ago lump-summing into a Swensen Portfolio. Folks here seem mixed at best about REITs...

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Re: REIT or No REIT

Post by Tamarind » Fri Feb 09, 2018 1:17 am

I have had a REIT tilt for 2 years, since becoming a Boglehead. It was my "curiosity" money as I wanted to see how it behaved relative to TSM as a whole and whether it provided a diversification benefit.

I will be ending the tilt and adding more bonds in March. This is not due to performance or timing... Actually they've done just fine and it's too soon to tell on diversification. But I'm getting married to another Boglehead who is uninterested in REITs and slightly more conservative in AA.

She wins on REITs and we split the difference in bonds. :D

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Re: REIT or No REIT

Post by abuss368 » Fri Feb 09, 2018 7:03 am

Tamarind wrote:
Fri Feb 09, 2018 1:17 am
I have had a REIT tilt for 2 years, since becoming a Boglehead. It was my "curiosity" money as I wanted to see how it behaved relative to TSM as a whole and whether it provided a diversification benefit.

I will be ending the tilt and adding more bonds in March. This is not due to performance or timing... Actually they've done just fine and it's too soon to tell on diversification. But I'm getting married to another Boglehead who is uninterested in REITs and slightly more conservative in AA.

She wins on REITs and we split the difference in bonds. :D
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Re: REIT or No REIT

Post by JohnDindex » Fri Feb 09, 2018 7:23 am

abuss368 wrote:
Mon Dec 25, 2017 7:18 pm
fmhealth wrote:
Mon Dec 25, 2017 5:26 pm
It appears that the new tax plan will actually have a very favorable impact on REITS.

https://seekingalpha.com/article/413351 ... form?ifp=0
This was my understanding as well. The historical thinking on REITs May need an update. You should start another thread.

I've always felt that the "asset location" theme with reits was overblown, it typically would take many decades to erode the basis and make the return of capital portion taxable. Not to mention, you can't look at things in isolation, everyone has a different tax situation.

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Re: REIT or No REIT

Post by livesoft » Fri Feb 09, 2018 8:36 am

Boston Barry wrote:
Fri Feb 09, 2018 1:00 am
Should I rebalance into VGSLX (Vanguard US REIT) now? Yield up to 4.42%. LOL I bought it a year ago lump-summing into a Swensen Portfolio. Folks here seem mixed at best about REITs...
You have to make your own decision.

I'm considering selling some shares of my TIAA Real Estate Account.
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Re: REIT or No REIT

Post by hdas » Fri Feb 09, 2018 8:51 am

livesoft wrote:
Fri Feb 09, 2018 8:36 am

I'm considering selling some shares of my TIAA Real Estate Account.
Mr. Livesoft,
Kindly explain why would such action makes sense right now, on the general investing case. (we don't care for your personal circumstances).

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Re: REIT or No REIT

Post by livesoft » Fri Feb 09, 2018 8:56 am

TREA pricing is smoothed and delayed by months. It has not dropped 10% like the the rest of the stock market. Its pricing is delayed from reality by a few months. This has all been discussed before: viewtopic.php?t=123075
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Re: REIT or No REIT

Post by abuss368 » Sun Feb 11, 2018 7:34 pm

JohnDindex wrote:
Fri Feb 09, 2018 7:23 am
I've always felt that the "asset location" theme with reits was overblown, it typically would take many decades to erode the basis and make the return of capital portion taxable. Not to mention, you can't look at things in isolation, everyone has a different tax situation.
Agree and well said.
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Re: REIT or No REIT

Post by LFKB » Tue Feb 13, 2018 2:23 pm

Valuethinker wrote:
Fri Dec 22, 2017 5:19 pm
betablocker wrote:
Fri Dec 22, 2017 3:50 pm
livesoft wrote:
Fri Dec 22, 2017 10:59 am
My case: REITs are bad investments in a rising interest rate environment since they run on borrowed money. REITs are volatile. If they drop significantly, then that will be the time to buy them, but be prepared to sell them if they go up quickly, too. If there is a 20% correction, then there will be so many other buying opportunities besides REITs.

Simply put: I think there are better opportunities elsewhere at this time.
This is false. They use fixed rated leverage which won’t go up. So their relative debt cost goes down not up. That’s a good thing and they can raise rents, also a good thing. It also makes building new stuff more expensive so less competition. You might not want to own REITs but your facts aren’t straight.
They are traditionally seen as interest-sensitive stocks.

Like utilities. Investors own them for yield, and when interest rates rise, the yields become less attractive. Also the cap rates of the underlying assets may rise (confusingly, in the UK we call that Yield, as well), and thus the assets are worth less, for the same rental income stream.

There's a caveat: if economic growth leads the Central Bank to tighten, then the fundamentals of the REIT businesses may also be getting stronger-- lower vacancy rates, higher rental growth.

What is happening in US retail though is not cyclical-- this is structural. There are a lot of malls that have closed, or are going to close.

Another complexity is around the thinness of the REIT index if you go back far enough-- makes the data less trust-able. And the undervaluation at the end of the 1990s, and then the superb outperformance in the early 00s. That makes the performance data harder to interpret-- because there is this strong serial correlation of the time series (ie a trend over time).
I had the same concern about malls but according to the Vanguard website it is 19.5% retail REITs, which I am okay with. If mall/retail were a higher percentage I would reduce my allocation to Vangaurd REIT but I am going to stay the course given it is 19.5%.

VGSLX as of 12/31/17
Diversified REITs 7.40%
Health Care REITs 11.40%
Hotel & Resort REITs 6.70%
Industrial REITs 7.50%
Office REITs 13.30%
Residential REITs 16.30%
Retail REITs 19.50%
Specialized REITs 17.90%

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Re: REIT or No REIT

Post by fennewaldaj » Tue Feb 13, 2018 2:52 pm

livesoft wrote:
Fri Feb 09, 2018 8:56 am
TREA pricing is smoothed and delayed by months. It has not dropped 10% like the the rest of the stock market. Its pricing is delayed from reality by a few months. This has all been discussed before: viewtopic.php?t=123075
Should't the price for the TIAA real estate account be unaffected by the stock market drop? My understanding is that is based on appraised values of the property it owns. In 2008-2009 prices of property dropped a ton along with the stock market so the account dropped as well with a delay. As far as I know commercial real estate did not also drop in value 10% this time.

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Re: REIT or No REIT

Post by livesoft » Tue Feb 13, 2018 3:01 pm

fennewaldaj wrote:
Tue Feb 13, 2018 2:52 pm
livesoft wrote:
Fri Feb 09, 2018 8:56 am
TREA pricing is smoothed and delayed by months. It has not dropped 10% like the the rest of the stock market. REITs. Its pricing is delayed from reality by a few months. This has all been discussed before: viewtopic.php?t=123075
Should't the price for the TIAA real estate account be unaffected by the stock market drop? My understanding is that is based on appraised values of the property it owns. In 2008-2009 prices of property dropped a ton along with the stock market so the account dropped as well with a delay. As far as I know commercial real estate did not also drop in value 10% this time.
Oooops, I should have said "REITs" instead of "stock market."

My question is not what has happened, but what will happen because we all know the TREA has a built-in delay.
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Re: REIT or No REIT

Post by fennewaldaj » Tue Feb 13, 2018 3:19 pm

livesoft wrote:
Tue Feb 13, 2018 3:01 pm
fennewaldaj wrote:
Tue Feb 13, 2018 2:52 pm
livesoft wrote:
Fri Feb 09, 2018 8:56 am
TREA pricing is smoothed and delayed by months. It has not dropped 10% like the the rest of the stock market. REITs. Its pricing is delayed from reality by a few months. This has all been discussed before: viewtopic.php?t=123075
Should't the price for the TIAA real estate account be unaffected by the stock market drop? My understanding is that is based on appraised values of the property it owns. In 2008-2009 prices of property dropped a ton along with the stock market so the account dropped as well with a delay. As far as I know commercial real estate did not also drop in value 10% this time.
Oooops, I should have said "REITs" instead of "stock market."

My question is not what has happened, but what will happen because we all know the TREA has a built-in delay.
My point was that the price of REITs is irrelevant to the price of the TIAA real estate account (except to the extent it has a small REIT allocation). It will only decline if the property it holds has declined in value. 2008 REITs declined in part due to the decline in the value of their property in this case I don't think that is why they declined.

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Re: REIT or No REIT

Post by livesoft » Tue Feb 13, 2018 3:21 pm

Yes, I get that was your point. And my point is that REITs can foretell what TREA is going to do in the future just like Green Street CRE index.
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