Reits got spanked

[FIREshrink]

thevaluedoc wrote:

FIREshrink wrote:

It went ex-div today. No need to panic.

https://institutional.vanguard.com/VGApp/iip/site/institutional/researchcommentary/article/NewsYearEndDistribution122017

Click to expand…

DMFA wrote:

REITs have been rubbish lately – the Big Box is dying, and a lot of it is in shopping mall companies like Simon – but it might be the time of year that it pays its big annual distro and takes it out of the NAV, but you get more shares in the distro so it evens out on your balance sheet.  Plus, with so much of REIT distro being unqual’d dividends, it’s liable to take a bigger hit than, say, VTSAX whose distro is almost all LTCG and QD.

Click to expand…

Funny, I guess  every Reit is having a distribution day today.

Edit: Given the previous comment, I don’t think my attachment went through so I added the link.  To the OP, I guess your last comment was intended for me. Oh well. If you look at TLT and at a Reit index, you will see that maybe there is more to it than just a simple distribution day. Something else is/maybe happening. Your choice whether you want my opinion or not, buy you asked. But don’t be surprised if the 10 year is at 3% in a few months. I don’t know what “high school” behavior you are referring  aside from a somewhat sarcastically worded but overall serious second comment. Many of the common posters on this site including the ones I quoted use pretty sarcastic comments to others with a different view point (just look up the multiple sarcastic comments to Crixus). As usual on this site, I regret taking the time to provide a different viewpoint for what is going on.

Click to expand...

vgslx went down $2.58 today and $1.92 was its projected dividend, implying a loss of value of 66 cents, or about one half percent.

[Zaphod]

Well rates also got spanked today as well, so that affects REITs as well since they are rate sensitive, the degree depends on their exact setup.

[Antares]

I hope the dividend is the explanation, as I just happened to rebalance into a REIT index fund — a substantial rebalancing! - YESTERDAY, and took a painful (real or imaginary) hit today. On the order coincidentally of 3%

[jfoxcpacfp]

erockin wrote:

I miss took those posts for sarcasm mocking my ignorance. No harm no foul. I apologize.

“The time to buy is when there’s blood in the streets.”

I did not find the written definition of “distribution” on Google to be helpful

Click to expand...

Oh, gosh, no - I would never do that. I am sorry that you even thought that for a few minutes! There are no ignorant questions here - I'm still learning myself   (and I've been spanked a few times on this forum, too  ops: )

[FIREshrink]

Antares wrote:

I hope the dividend is the explanation, as I just happened to rebalance into a REIT index fund — a substantial rebalancing! – YESTERDAY, and took a painful (real or imaginary) hit today. On the order coincidentally of 3%

Click to expand...

Did you buy the dividend?  8O

[Antares]

FIREshrink wrote:

Antares wrote:

I hope the dividend is the explanation, as I just happened to rebalance into a REIT index fund — a substantial rebalancing! – YESTERDAY, and took a painful (real or imaginary) hit today. On the order coincidentally of 3%

Click to expand…

Did you buy the dividend?  ?

Click to expand...

No, I bought the fund. The day before.

[Antares]

I see that yesterday was in fact the effective date for the dividend in the fund. So that may explain part of the dip. Odd coincidence however that the day was also awful for bonds, so I assume there was a real hit, and a partial recouping that will show up in my account sometime in the next few days.

[FIREshrink]

Antares wrote:

FIREshrink wrote:

Antares wrote:

I hope the dividend is the explanation, as I just happened to rebalance into a REIT index fund — a substantial rebalancing! – YESTERDAY, and took a painful (real or imaginary) hit today. On the order coincidentally of 3%

Click to expand…

Did you buy the dividend?  ?

Click to expand…

No, I bought the fund. The day before.

Click to expand...

that is what is known as “buying the dividend”. you received the dividend and will thus pay taxes on it*, even though you did not own the fund all year or have an actual increase in wealth. in the future you should buy funds after the dividend is distributed.

 

*all irrelevant in a tax advantaged account, where you should be buying REITs anyway.

[Antares]

Good insight, thank you. Fortunately I purchased it in my individual 401K.

[ACN]

To those who have a small allocation in their portfolio to REITs, do you guys invest only in US Reits or have some international exposure?  I have about 10% of our portfolio in US REITs, was wondering if I should allocate some of that 10% to International.

Thoughts?

[G]

Only US for me, but this is an equally simple and intriguing question!

[Re3iRtH]

I've always wondering why folks want to invest in a REITs, putting 100% of the control out of your hands. Why settle for a 5-7% returns (on a good day) from a REIT? Why not just invest in an S&P500 fund? I understand the "non-correlated asset bit", but over the long term, a total market or S&P fund will outperform.

I think people want to feel like they are "investing in real estate" by buying a REIT, the reality of which couldn't be farther from the truth.

I've compiled a short list of advantages when you actually invest in real estate, none of which are available to you when investing in a REIT.

- choose your own market, submarket, etc.
- can find off market deals for massive discounts
- can select a unique "niche" or specialty. Can specialize in something, gaining a informational or submarket analysis advantage
- negotiate your own price
- find and use your own leverage, and leverage terms
- can pick the best LTV on your loan, and modulate your tax benefits, so that you don't pay any tax legally on a paper real estate gain
- can 1031 exchange

- individual deal always return higher per $1 invested than a large apartment, a large apartment always returns more per $1 invested than a REIT invested in a large apartment (more downstream from the profit, more people need to be payed until it trickles down to you)

- can choose to self-manage in lean years, eliminating negative cash flow. Personally haven't had to do this yet.
- can do a cash out refinance. for example: I purchased a condo for $148,300. I refinanced out ~$163,000 in cash, which is tax free money. I was actually payed cash to own this home, and now I am getting a net $650 per month cash flow and have $0 in the deal. Try doing that with a REIT. This isn't even a "home run deal".

I wouldn't invest in a REIT. Returns on leveraged real estate are usually 20-40%, sometimes over 100% like the example I outlined above. You are too far removed from the good returns investing in a REIT. I guess people want variety in their life and settle for the mediocre returns a REIT provides. No idea.

 

[G]

I own both real estate and reits. One is likely a better return. The other has never called me on vacation or ruined a ski day. I guess that would be one idea!

[Notorious BNG]

Any opinion on private REITs? They claim to be less related to the stock market, although they seem less liquid and I don’t understand their NAV.

[Zaphod]

Notorious BNG wrote:

o

Click to expand...

They are notorious for abundance of scams and losing money. Avoid.