Tag: t_REIT

usReit as initial form@ U.S.lease_spread

Posted on by tiger40490

Lease-spread has 2 legs. The income leg is based on leasing my property, which could be Reits.

The more sunshine it gets, the faster this seed grows into a full fledged plan.

Q: What if I build up a 300k Reit portfolio to generate 5% dividend [i.e. 15k/Y] and remain a renter indefinitely? When time is right, I can incrementally liquidate it to buy a rental property.

Ignoring “external” rental incomes (other housing units) but considering subletting, what’s my expected net rent outlay? $2k/M or $24k/Y. At 6% DYOC, a 400k Reit portfolio would take care of this outlay.

For the same amount of capital, how does this portfolio compared to 43R or my Asia rental properties? Fundamentally different assets but still comparable.

  • benefit: no lock-down to one location
  • benefit: incremental acquisition/liquidation
  • benefit: diversification. Lower location-specific risk
  • benefit: liquidity
  • benefit: transaction fee very good when I buy or sell
  • drawback: NRY is less deterministic than rental property
  • drawback: NRY (net) is probably much lower than 43R

— #1 drawback: no windfall appreciation. No ownership of a rental property. See https://tanbinvest.dreamhosters.com/wp-admin/post.php?post=11629&action=edit

As Brian@RTS pointed out, in most U.S. locations inflation-adjusted appreciation is insignificant. However, JC and other parts of NJ might be exceptions.

— active management legwork and emotional costs of delinquency, repairs, vacancy .. is not reflected in my rental yield. I am willing to pay the Reit operator to handle them. Reit management fee is higher than ETF, but not always disclosed.

—-

Need to reduce the mReits , and limit myself to old-fashioned lease operations. I think equity-Reit is similar to that.

[17]sReit as proxy+parking@@ NO

Posted on by tiger40490

I feel up to 10k investment is fine if I have surplus USD. Target dividend = 6% of the initial investment amount.

Li Qi has more experience with sREITs and felt the supply/demand dynamics are more like stocks than properties. But I guess long-term trend and DYOC are the things to focus on, and sReits may resemble rEstate.

There are many online articles comparing REITs vs real properties. It may be too time consuming to read all of them.

— if a SGX REIT offers consistent 5.5% yield without the legwork, then i think it’s comparable to PeakRetail in rental yield.

— Compared to real properties — reliable dividend on the back of a real estate asset with capital appreciation potential.

  • 🙂 much smaller quantum
  • 🙂 much better credit risk
  • 🙂 much more liquid .. lower transaction cost, faster completion
  • 👎higher volatility
  • 👎capital appreciation much lower, if any. Probably similar to the capital appreciation of stocks.

Q: if you hold 10Y, is there a good chance of appreciation? I feel yes for real estate in parts of Asia, tristate but but not in many U.S. states and not for REITs

https://www.99.co/blog/singapore/reits-properties-investment/ lists many risks, complications and active management required of landlords. With these “risks”, the  return is presumably much higher than REITs. However, the Singapore data in this web page proved me wrong.

— Compared to a high-dividend stock

I don’t want to take further risk than REIT. I feel a dividend stock would have much higher risk, too uncomfortable for me.

 

 

REIT/dividend stock^shop unit

Posted on by tiger40490

Bearing in mind our need for income (more important than windfall appreciation), let’s pit the best property (shops with rental guarantee) against best dividend stocks (REITs). Below are my personal biases, without any real evidence.

  • liquidity — stocks win. We can sell and buy them easily.
  • quantum — stocks win. We can trade with $100.
  • legwork — (active management) REITs beat most properties except properties with guaranteed rental.
  • credit risk of the promised dividend — stocks win. Investors don’t need to worry about missing rental receivables.
  • transaction cost — stocks are very efficient. Property sales requires commission, legal fees, taxes, etc. These transaction costs need to be included as purchase price.
  • currency risk –stocks win if they are in the investor’s home currency. A lot of rental properties involve currency conversion, but some shop units (Cambodia for example) are priced in USD
  • regime risk — stocks win, as most stocks are in developed countries.
  • legal risks — stocks win since they are supposed to be less affected by local legal issues. In the case of my shop units, the lease agreement (companion to the purchase agreement) is a 17-page legal document with lots of fine prints … presenting legal risks to the investor.
  • repairs — REITs win as the maintenance responsibilities are taken care of. If a shop unit is new and well managed by a local agent, then repairs are taken care of too.
  • ^^^^^^ All these factors make listed securities appear easy, familiar, approved / regulated / legalized … safe-looking
  • —Now the strengths of rental property
  • #3 current income — shop unit wins with guaranteed rental. A residential rental property also generates typically higher income than the average stock, though some dividend stocks can generate 10%+ possibly unsustainable.
  • #2 stability of income — shop unit wins IMHO. A shop in a good location will not stay vacant. In general, properties (not stocks) give me confidence to invest 6-digit sums to generate substantial income for retirement. No stock can guarantee any dividend.
  • #1 principal protection — shop units show more rock-solid strength, esp. when endorsed by Shangrila and CapitalLand.
  • #4 appreciation — shop units show more potential, largely because of very limited mind-share .. exotic alternative investment. The lesser known, the more potential for appreciation. See also owning property^REIT

Personal experiences:

  1. rental property — I collected some guaranteed rent from Cambodia. My own HDB home was rented out for a few years. More importantly, I myself lived in my own HDB home for years, saving thousands of rental dollars every month
  2. high-dividend mutual funds — I invested for many years since 2012. Rather poor performance, probably 2-3% yield only.
  3. REIT or high-div stocks — no experience

Based on my experiences and analysis,

  • my property assets will be my core portfolio, generating income that I need here and now. I’m less worried about cash flow in the distant future.
  • I will buy some REITs and high-dividend stocks primarily for the income. Any appreciation would be bonus. Budget = 2k, rising to 100k, paying out a consistent $500/M. I would need to use SGD.

However, property rental income still feels superior because “NAV fluctuation” is unknown and therefore a non-issue so the asset is a cash cow. In contrast, stocks show visible fluctuation so we question whether the dividend is paid from NAV. With the high-dividend unit trusts, a lot of times dividends are indeed paid out from NAV. I hope with blue-chip stocks I can rest assured that dividend comes from operating profit.

U.S.dividend: y so high #REIT++

Posted on by tiger40490

Basic reason: depreciation risk — Jack Zhang said when a REIT cuts its dividend yield, the stock price may collapse.

2013 https://seekingalpha.com/article/1243211-reits-why-the-dividends-are-a-mirage

2019 https://www.simplysafedividends.com/intelligent-income/posts/3-high-yield-dividend-stocks has a detailed analysis

–2019 https://www.simplysafedividends.com/intelligent-income/posts/3-high-yield-dividend-stocks has some discussion on why some dividends are very high.

  • maturity of company such as telecom and utility stocks

–2018 https://investorplace.com/2018/09/real-estate-investment-trusts-high-yields-invtlk/ says  REIT’s are a creation by/of the U.S. government.

–2018 https://www.investopedia.com/articles/investing/012816/basics-reinvesting-reit-dividends.asp says

Many REITs have long track records of generating continuous and increasing dividends, even during the tumultuous real estate crisis of 2008. A solid-performing REIT typically invests in a large, geographically dispersed portfolio of properties.

REIT^property^E12 #bargain+debt #w1r2

Posted on by tiger40490

Buying an individual property provides much higher return than buying a comparable REIT. The key — bargain!

Say you have 300k to invest, either in a property or in a simple property-holding REIT without any value enhancement.

  • if you are inexperienced, I think the REIT is safer due to liquidity, diversification etc. You may earn $15k/Y or 5% in dividend.
  • if you are experienced, you can spot bargains and get good rental yield and/or appreciation. You could earn 24k/Y or 8% in NRY + 200K~600k capital gain. You won’t get the same from the REIT. In fact the REIT company boss is another experienced investor. She spots bargains, which generate outsize returns, but she won’t pass on all the profits to you in the form of REIT dividends. She would keep most of the profit as her own profit !

In fact, this is similar to Macquarie MIRA fund (or AsiaProperties or a hedge fund) spotting bargains and passing on a small part of the profit to investors. A decent hedge fund typically passes on a good portion to investors to make 6% return in a reasonable year. Clearly the fund itself makes a lot more profit.

Bargain picking is high-risk-high-return game These fund managers risk OPM (optionally with some house money at, say, 22% of the total) but cut a disproportionate share of the return, much higher than the 22%. In other words, investors take on all the risk, but receive part of the return.

Debt — is another Fundamental difference. Debt is frequently used by REIT operators, as a double-edge sword. Though it can enhance return (possibly the dividend yield), I generally avoid debts in my own property investments because the mortgage interest can erode my rental income.

The above probably describes the Singapore REITs. Now let’s look at the more advanced REITs, highly “visible” in the U.S. I can see this process in Energy12, AsiaProperties and MIRA (Macqurie Infrastructure and Real Asset).  These deal makers can create huge value on the real estate bargain assets they buy. They enhance the assets and generate large profits, but again, the few individuals (deal makers) involved invariably keep a disproportionate share of the profit.

— In all REITs, the apportionment of profit includes “sweat equity”.
Say deal makers put in $12M, and REIT investors put in $88M. Out of the gross profit, deal maker first takes 50% as compensation. The remaining “net profit” is split 12:88 based on investment amount or outstanding shares. Effectively, the sweat equity is equivalent to $100M of capital.

REIT investors receive 88% of the net profits i.e. 44% of gross profit, which could translate to a 10.3% annualized return, beating the benchmark.

Suppose you as a REIT investor complains about the 50/50 split. Deal maker could say “If investors don’t rely on my bargain hunting skill, then they get none of this return. Investors could choose not to invest with me. It was investors’ choice .. take it or leave it. If you think you can get bargains yourself, then you can run your own REIT.”

property/REIT^stock ^HY: consistent div+ appreciation@@

Posted on by tiger40490

Q1: which ones can achieve capital appreciation while generating consistent income?

Clearly properties can, but is that the only asset class?

REITs? Not sure. See other post.

HY bonds can pay good coupon dividends, but capital appreciation is rare.

I think growth stocks can have fastest capital appreciation, but generally don’t pay consistent dividends. In contrast, I guess utility stocks pay consistent dividends but without comparable capital appreciation.

Q2: Are there reliable stocks with consistent dividend history + capital appreciation potential? Look at https://tanbinvest.dreamhosters.com/2017/01/20/attractive-assets-must-be-expensive/. Whatever the company size and location,  investors the world over would be interested. It’s  easy to buy a small amount and exit any time, so the risks, liquidity, information availability and mind-share … is ten-fold better than any property in any (global) city. Such a poster boy is sure to trade a premium, therefore limiting its room for further appreciation. If it’s not traded at a premium, then there must be something unfamiliar or unsavory about it.

sReit according to Qi.Li’s husband

Posted on by tiger40490

Many claim that sReits feel like stocks, but it’s very misleading. There are penny stocks; there are hot growth stocks; there are speculative stocks; there are dividend cash cows; there are blue-chip (but low dividend) stocks.

I guess some of the sReits are like low-growth dividend stocks.

— Sam outlined 3 main types of REITs in Singapore

  • Commercial – highest risk, highest return — around 7-8%
  • Shopping malls
  • Office building

Usually 5%+ return, definitely higher than bank deposit.

In a typical sREIT listed on the stock market, the quoted price may not change a lot, but share holders get dividends quarterly, semi-annually etc.

Recommended amount — S$5k