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Case for or against REITs in this environment?
Invested in a simple lazy portfolio that is 70% stocks, 30% bonds. I've been reading about REITs as a diversifier and LT investment, and I'm thinking to add 10-15% of real estate to help smooth out any big waves to come. Dividends look real nice and with the government intending to keep rates low, stable returns and dividends are attractive in this day and age. Is it a good move to add them? What's the case for or against REITs? Are there other better ways to get RE exposure if not thru REITS?
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M
Depends on the specific type of Reit. For obvious reasons, I'm not so sure about office or retail but if you are considering these two sectors, focus on high quality. As a whole, net operating income will be under pressure and so the risk is higher. I would tread carefully, especially if interest rates go higher which tends to dampen Reit prices.
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@Max948 Have you seen The Gist that speaks to healthcare REITs specifically? It's here where it goes into healthcare REITs specifically. Summary is that there is a case to be made for healthcare REITs in the long term, but beware rise in rates as Max rightly says!
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D
@Jess225 Good write-up on these REITs. Good tips thank you for it!
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J
Still in the midst of a pandemic, I'm not so sure you want to double down. Have you checked how much real estate is exposed in your equity allocation? VTI a broad US-based ETF from Vanguard has 3.1% invested in real estate. Consider how much your current investment makeup is in real estate already to inform how much more you want to add if any.
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D
@Jack449 I hadn't thought of that, that's a terrific point!
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W
Reits valuations are high. Take a look at the VNQ returns which have gone up more than 70%, sitting pretty at 52-week highs. I'm bearish because fundamentals are still challenging, valuations are really high and the 10 yr treasury rate is no doubt going up. If you are focused on getting in RE, look at the ones that focus on high-quality and unique business models, like VICI.
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Finny Dolphin
You may find this lesson relevant and helpful.
Click on it below and a new tab will open and take you directly to the lesson.
A
If you look at the aggregate return of the overall REIT sector versus the S&P 500 over the past 20 years, it returned 629% versus the S&P 500 at 277%. REITs more than doubled the return of the broader market, which may come as a surprise for many. If held for long periods it is worth adding as it also acts as a diversifier.
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D
@Andy893 That's compelling- thanks for that.
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S
Thanks for asking this. I'm looking into Fundrise right now but you have to lock up your investment for at least 5 years. There's a minimum investment too. Think I need to do more DD before deciding here, but REITs are attractive because you get the exposure, doesn't require a min amt and can be traded anytime.
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