Investing in REITs

[Jouhou]

So this seems like the appropriate forum to discuss this topic!

So as of last year my dad decided to start giving me money for me to practice investing with. I've already been watching markets for years and have practiced researching and guessing where the markets and individual stocks were going and apparently have been accidentally giving my parents extremely good recommendations for nearly a decade, as they've revealed to me.

So last year I invested entirely in FRT (Federal Realty Investment Trust) knowing that the economy was going to soften moving forward. From what I could see from Assembly Row I felt their strategy (focusing on mixed use development to feed retail with customers) is the only way a retail focused REIT was going to succeed moving forward. I also just like buying into the move from strip malls and, well, malls, to urban friendly development.

The dividends they pay out are compensating in any decline in share value, and I'm content with that and am going to buy more shares.

I also just bought some SNH (Senior Housing Properties Trust, they own the shiny new Vertex building in the seaport) who have seen some battered shares recently due to debt, but looking at their financial info they're millions ahead on paying down their debt. Their shares have tanked like GE but they aren't in the same kind of financial bind.


Anyways, anyone have any good suggestions for any good publicly traded REITs that might be flying under my radar? It seems most of the developers in the area who I'd be most optimistic about are private.

I'm sure there's at least a few of you on here who actually work in the industry, and aren't just enthusiasts investing like me.

Would love some tips on other publicly traded REITs doing good things for urbanism and mixed use development.

 

[Shepard]

I love this topic - but I’m not any sort of professional in this area. Take my advice for what you will.

First and foremost the mantra that’s worked for me is to keep your assets very well diversified across sectors. The reasons are fairly obvious and many studies have confirmed diversified buy-and-hold investing yields the greatest returns in the long run. For many US homeowners I’d say they have so much of their personal wealth tied up in the value of their home that they should use the stock market to gain exposure into other sectors. That being said, for non-homeowners, publicly traded REITs are a great way to get exposure into real estate.

The same caveat about diversification across sectors holds true within sectors. While it’s definitely fine and good to buy individual stocks you’ve researched and believe in and are willing to hold long term, that should only be a small part of your portfolio. For example I own shares in IYR which is an iShares ETF that tracks US publicly traded REITs. It gives me comfort knowing that my gains or losses in this sector aren’t due to my own analyses or mis-analyses.

No matter what, when you take a firm position, always think about the hedge. If you believe in mixed use real estate development that’s great. Maybe the kind of retailers that anchor mixed use developments will thrive. I hope they do. Invest in those. But also take a stake in online retail just in case - maybe a position in Amazon for example. It doesn’t need to be 1:1 but think of a roulette table - you’d rather place your chips around on mutually-exclusive bets than put everything on 26.

Finally I’ll pass along some advice that someone wise once gave me but I never personally took (cue sad trombone). If you know a lot about a sector, feel passionate about it, and are willing to sink your time into it, that’s a sector you should seek to work in rather than small-scale invest in. Your knowledge, passion and time will go a lot further towards getting you a bigger ROI than small time investing. Save your cash for passive exposure into other sectors you’re less interested in - life sciences, resources, tech, whatever.

Good luck!

 

[Jouhou]

Everything I want to invest in that isn't a REIT is pretty set to get pounded on the markets for the next couple of years. I'm waiting for the next economic crisis basically, that I have a feeling is coming ~ early 2020 time frame.

Also SNH is my investment in life sciences for the moment! Despite their name, about a quarter of their portfolio is in lab space.

 

[fattony]

Shepard gave some pretty good advice there, so while I'm going to contradict him a little it isn't because he's wrong. It's because what he describes is very hard to do as an individual and you will almost certainly make mistakes.

I would not recommend investing in anything more complicated than passive index funds, "target date funds," or robo-investing (e.g. Betterment or similar) for anyone. Full stop.

Investing in individual REITs or really any individual security is risky compared to passive index funds. If you have made a few good picks in recent years you can easily trick yourself into thinking you know how to pick 'em. No offense personally, but you don't know how to pick 'em. In the long run, your luck will run out or your skills will fail you. Everyone's does, even financial professionals. That is why actively managed mutual funds are going the way of the dodo - because even the pros are admitting that they can't win.

I 100% agree with Shepard's assertion that you need to diversify. I only disagree with trying to beat the broad market by picking sectors or stocks or REITs in any way. Buy low cost passive index funds or use a robo-investor to do so for you. That gives you all the diversity you need.

Now naturally, I have to contradict my own advice as well. I allow myself to pick individual stocks with 2-3% of my invested money. I do it because I like it and I think it is fun. It's great to have something to "bet" on and feel hopeful about. It is also very exhilarating to "win" on one of your bets. But I only do it with a small fraction of my money, just to give myself an outlet for those natural human emotions.

P.S. - I realize I didn't answer the question you asked. I just wanted to say my piece as a disclaimer for anyone who hasn't heard this message before. I don't mean to derail the discussion of REITs.

 

[Jouhou]

Shepard gave some pretty good advice there, so while I'm going to contradict him a little it isn't because he's wrong. It's because what he describes is very hard to do as an individual and you will almost certainly make mistakes.

I would not recommend investing in anything more complicated than passive index funds, "target date funds," or robo-investing (e.g. Betterment or similar) for anyone. Full stop.

Investing in individual REITs or really any individual security is risky compared to passive index funds. If you have made a few good picks in recent years you can easily trick yourself into thinking you know how to pick 'em. No offense personally, but you don't know how to pick 'em. In the long run, your luck will run out or your skills will fail you. Everyone's does, even financial professionals. That is why actively managed mutual funds are going the way of the dodo - because even the pros are admitting that they can't win.

I 100% agree with Shepard's assertion that you need to diversify. I only disagree with trying to beat the broad market by picking sectors or stocks or REITs in any way. Buy low cost passive index funds or use a robo-investor to do so for you. That gives you all the diversity you need.

Now naturally, I have to contradict my own advice as well. I allow myself to pick individual stocks with 2-3% of my invested money. I do it because I like it and I think it is fun. It's great to have something to "bet" on and feel hopeful about. It is also very exhilarating to "win" on one of your bets. But I only do it with a small fraction of my money, just to give myself an outlet for those natural human emotions.

P.S. - I realize I didn't answer the question you asked. I just wanted to say my piece as a disclaimer for anyone who hasn't heard this message before. I don't mean to derail the discussion of REITs.

My actual retirement fund which isn't managed by myself has a whole lot more money in it and is currently 100% in the safest fund possible. These individual investments are considered "practice" by my parents and doesn't involve nearly as much money- Also a lot harder to diversify at that low of value.

Meanwhile I've sunk 9 years into my current career, I'm not changing it anytime soon although I may fantasize about doing so on bad days at work.

Edit: my own disclaimer, I'm not aiming to gain money here. This is more "recreational" level investing and honestly the way the markets have been going, losing less than the major indexes have been is a feel-good accomplishment in my eyes.

 

[dwash59]

I was going to recommend senior communities, but it appears SNH covers that. They are a weird mixture of urban and not in that one can live a very urban lifestyle there (walk to everything you need, live in a 1-2 bedroom apartment, etc.) despite them being in the suburbs typically.

 

[Jouhou]

Also since everyone is sharing general investment philosophies here, my family has been sticking to a mantra of "Invest in sectors you know the best" which has been pretty successful over 3 generations of my family. My father is currently managing my grandmother's account because her Alzheimer's is interfering with her ability to do it herself. When he gained access to it and had $5 million invested and $600k in dividends to reinvest. Investing in individual securities is not that unsafe if you plan on holding on to them for decades. Although I'm sure GE has created some strong disappointments for people in recent years...

Anyways I can imagine my parents are having me "practice" now so I can do the same for them when they become super-elderly.

 

[Shepard]

Jouhou, sorry I had this veer more towards generalized investment strategy. Without the extra context you've just given, it was hard to say in a vacuum what a good investment could be, because on the surface there's going to be an opportunity cost to anything. Also, to be frank, the tone of your question made it sound like you were less savvy about all this than evidently you are. My mistake. So, I'd personally also love to know what people think are the good REITs to invest in. I'll stay quiet though and let others talk..

 

[bosdevelopment]

So this seems like the appropriate forum to discuss this topic!

So as of last year my dad decided to start giving me money for me to practice investing with. I've already been watching markets for years and have practiced researching and guessing where the markets and individual stocks were going and apparently have been accidentally giving my parents extremely good recommendations for nearly a decade, as they've revealed to me.

So last year I invested entirely in FRT (Federal Realty Investment Trust) knowing that the economy was going to soften moving forward. From what I could see from Assembly Row I felt their strategy (focusing on mixed use development to feed retail with customers) is the only way a retail focused REIT was going to succeed moving forward. I also just like buying into the move from strip malls and, well, malls, to urban friendly development.

The dividends they pay out are compensating in any decline in share value, and I'm content with that and am going to buy more shares.

I also just bought some SNH (Senior Housing Properties Trust, they own the shiny new Vertex building in the seaport) who have seen some battered shares recently due to debt, but looking at their financial info they're millions ahead on paying down their debt. Their shares have tanked like GE but they aren't in the same kind of financial bind.


Anyways, anyone have any good suggestions for any good publicly traded REITs that might be flying under my radar? It seems most of the developers in the area who I'd be most optimistic about are private.

I'm sure there's at least a few of you on here who actually work in the industry, and aren't just enthusiasts investing like me.

Would love some tips on other publicly traded REITs doing good things for urbanism and mixed use development.

Steer clear of individual REITS and invest in $VNQ. 12 bps. A better strategy: buy local real estate as early as you can. Why trust some stranger when any halfwit can do it.