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I have been reading a little about REITS,I started thinking of income trust funds ,but with these having to change in Jan.2011 I don't like investing in them.I am wondering if theres any rush expected for investors to sell the income trusts shares and buy REITS. I have not seen any mention if it so far. It seems to me that with income trusts becoming corporations ,the alternative would be REITS. If this is the likley case ,then would this drive the price of REITS up?
I'm new to this stuff .I'm a long term investor but have not bought anything for over 20 years ,just holding .I'm getting ready to retire and looking for better than the bank GIC's etc.
Neil
 

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"It seems to me that with income trusts becoming corporations ,the alternative would be REITS. If this is the likley case ,then would this drive the price of REITS up?"

This phenomenum, if it ever existed, would have been completed in 2006 and perhaps a little in 2007. The income trust tax is old news. Investors are forward thinkers and the new tax would have been calculated for each trust within weeks of the announcement and any new strategies would have been implemented around then.

If anything, you might find buying the income trusts to be more of the opportunity. To take advantage of all those retail investors, that have not learned this important lesson and have undervalued those businesses by not buying them in 2009 and 2010 (thinking in error, that they had more to fall from the tax news).
 

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I am wondering if theres any rush expected for investors to sell the income trusts shares and buy REITS.
I think to a large extent, this has already happened.

Most income trusts took a very large hit after the initial announcement of the change in tax status, and have not recovered to pre-crash valuations as most other equities have.

And the run up in REITS over the past 8 months, despite depressed rental rates and increased vacancies - and in many people's opinions, slight over-valuation probably means many people have already flocked to REITS.

IMHO :p
 

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And alot of the income trusts that convert to corp's will still payout, just in the form of a dividend, instead of a distribution, although the payouts are to be determined, as they have until Jan. 1, 2011 to convert.
 

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It's amazing how many people will flock to REITs when they already have hundreds of thousands of dollars invested in the real estate market through their homes.

Of course, we don't all see it that way, and REITs give you monthly income which is cool. I think that royalty trusts are also exempted from the new tax laws coming into effect. This might be another idea for those looking for income trust income but diversifying out of real estate.
 

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It's amazing how many people will flock to REITs when they already have hundreds of thousands of dollars invested in the real estate market through their homes.
While I'm certain most people don't think of it this way, and probably should, I'm not convinced that 'over-exposure' to real estate is a bad thing. Real estate appreciation (both value and rental income generation) has historically kept up with inflation, with bouts of significant appreciation (now).

Having exposure to an asset that is not eroded by inflation is one of the main reasons I don't hold 100% in fixed income, whether CDs or bonds. Knowing that my home value will earn something in-between my stocks and bonds is quite comforting.

Again, take this with a grain of slat, because everyone is talking bubble now anyway.
 

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I do think of my real estate as a hedge against inflation, and nothing more. For my actual investing, I do mostly couch potato, with some allocation to oil and gas (because I am really comfortable in that sector).

I said I don't want any more concentration in real estate: another way I could have said the same thing is "I am not satisfied with only hedging inflation."
 

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When you buy a REIT you are buying a piece of commercial real estate which is appraised and valued entirely differently then residential real estate. It also holds it's value a lot more then residential real estate. Many REIT's also own different kind of buildings in different geographic ares.

What you are saying is like saying that people should not own Ford stock because they already have a car.
 

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REITS is good option because dividends are higher than those of common stocks and its also a long term investment and gives big profit if choose Properly. There are wide variety of REITs & we have to learn & choose best of them for maximum benefit.
 

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I have been reading a little about REITS,I started thinking of income trust funds ,but with these having to change in Jan.2011 I don't like investing in them.

I am wondering if there's any rush expected for investors to sell the income trusts shares and buy REITS. I have not seen any mention if it so far. It seems to me that with income trusts becoming corporations ,the alternative would be REITS. If this is the likley case ,then would this drive the price of REITS up? ...
You are overlooking a couple of things.

First - nothing is changing for a REIT so they aren't changing (ex. RioCan REI-UN). The ones that are changing weren't real estate - they were businesses like oil, restaurants, power generation etc.

Secondly - some trusts decided the change wasn't worth the cost, stayed a trust and are paying the new taxes (ex. Boston Pizza Royalties Income Fund BPF-UN) and are paying more taxes so that the cash distributions have reduced.

Third - shifting from a trust that converted to a corporation to a REIT just about always means changing the underlying business and the investor's assest allocations. For example, if one had money in PenGrowth Energy, shifts it to a REIT such as RioCan - that means the investor has moved from oil/gas into real estate business.

Fourth - the changes were announced in 2006 so any big shifts have already happened as the institutions etc. have already made their plans and moved their money.

Fifth - when some investors discovered the bookkeeping that RoC requires, many were happy their trust converted to a corporation and the bookkeeping was not going to be required in future years.


The bottom line seems to me that less money than you are thinking was moved and it was done a long time ago so any effects have no since been priced into the REIT unit prices.


Cheers
 

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And alot of the income trusts that convert to corp's will still payout, just in the form of a dividend, instead of a distribution, although the payouts are to be determined, as they have until Jan. 1, 2011 to convert.
I'm not sure this is true ... certainly the trusts had until Jan 1st, 2011 to convert before the new taxes kicked in.

However, there was at least one trust I recall in 2010 that was saying they planned to use up their tax pools first and then convert sometime in 2014. Since I don't own it, I haven't checked to see if that's still the plan.


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REITS is good option because dividends are higher than those of common stocks and its also a long term investment and gives big profit if choose Properly. There are wide variety of REITs & we have to learn & choose best of them for maximum benefit.
Actually, REITs pay cash distributions made up of many different types of income, dividends may be one of them. The key thing is that most pay Return of Capital (RoC) which reduces the Adjusted Cost Base (ACB), where if the ACB falls negative, the RoC portion is reported as a capital gain in that tax year (even though the units have not been sold).

Some investors prefer to hold REITs in their RRSP or TFSA so that they don't have to keep up with the bookkeeping.

Here is a Globe & Mail article or you can check out the CMF taxation section:
http://www.theglobeandmail.com/globe-investor/wrapping-your-head-around-reit-taxation/article5575073/


As a side note - some ETFs and Mutual Funds also pay RoC so there's more areas to watch out for the bookkeeping.

Cheers
 

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The income trust issue has already been well sorted out. That being said, REITs are incredibly popular and that has pushed down the yields considerably. RioCan has just a 5% yield, and it's primarily RoC and interest income, making it less ideal for taxable accounts. There are some smaller REITs with more typical yields in the 7-8% range but you do take more risk. 5% is hardly an unusually high yield, showing you how popular REITs are. RioCan is so popular that its payout ratio is higher than 100%, giving it an effective price to cash flow greater than 20; it's paying out everything and you still can only get a 5% yield.
 

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The income trust issue has already been well sorted out. That being said, REITs are incredibly popular and that has pushed down the yields considerably. RioCan has just a 5% yield, and it's primarily RoC and interest income, making it less ideal for taxable accounts...
True ... though with more people paying attention to the OAC clawbacks, some are looking for more RoC to be paid to minimise the effect on OAS.


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The income trust issue has already been well sorted out. That being said, REITs are incredibly popular and that has pushed down the yields considerably. RioCan has just a 5% yield, and it's primarily RoC and interest income, making it less ideal for taxable accounts. There are some smaller REITs with more typical yields in the 7-8% range but you do take more risk. 5% is hardly an unusually high yield, showing you how popular REITs are. RioCan is so popular that its payout ratio is higher than 100%, giving it an effective price to cash flow greater than 20; it's paying out everything and you still can only get a 5% yield.
Yes, REITs are getting pretty richly valued.
 
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