Hi all,
Based on the real estate downturn in the US for the past few years, do you see buying US REITs as an opportunity to cash in on low valuations? Bear in mind this would be for the long term, so the rationale would be the expectation that REIT prices would gradually increase.
As an example: Vanguard REIT ETF:
http://www.google.com/finance?chdnp...4449&chls=IntervalBasedLine&q=NYSE:VNQ&ntsp=0
I'd be interested in hearing your points of view on this.
Cheers!
Do you already invest in REITs and if so is there a reason you are looking at US rather than Canadian REITs?
I don't invest in ETFs so I wont comment on them except to say that I keep an eye on a few and my individual REIT picks outperform them as far as didtributions go , some small cap REITs can be a little more volatile and illiquid than ETFs though.
I invest in small cap REITs only , they tend to pay out much better than the large caps , something that to me is worth the extra risk.
A lot of REITs offer a 3% bonus for those who DRIP , coupled with an already attractive distribution , that can add up in a hurry.
I think canadian REITs are pretty fairly priced right now , and as Canadian real estate has held up better than the US (so far), but REIT prices fell along with the market during this latest crash , I think Canadian REITs are a great opportunity.
Most REITs have cut their distributions dramatically and are at all time lows , as the market comes back and unit prices recover ,(most of mine are up 20-30% from just a few months ago when I averaged down) , I expect those distributions to increase , driving up my return on investment , (already at 16%+).
Also remember that there are different sectors in REITs themselves , hotel REITs and REITs supplying some services , will not be able to retain their REIT status come 2011.
Some will still be profitable and continue to pay out well though.
There is also a big disconnect between residential and commercial/industrial property , when most people think real estate markets , they are thinking about residential markets , commercial /industrial real estate can be much harder to asess a proper value on as it trades less frequently in general , but I feel it has held up well in Canada with less volatility than the residential market.
Most of my REITs are in that sector , and most have occupancy rates of 95% or better with long term leases in place.
Also look at REITs tennants and lease terms , long term leases and big name tennants , goverment contracts , etc are good for a REITs stability.
5 months ago was the time to get into REITs , but now is still good in my opinion , with interest rates still low for who knows how long , bonds not yeilding like they used to , housing market volatile , and most income funds up in the air due to the new tax laws , I think people are moving to REITs in a big way for the returns.
The increase in my REIT holdings tend to indicate such , or could it be that they are just moving up with a bull market in general.
I'm betting big time on REITs.