Investing in REITs

[Thomas Beyer]

[quote user=ThomasBeyer]A REIT is as volatile as a stock .. Thus same caution as stocks e they trade on rumours and sell off on a big market sell off .. Many Canadian REITs, say Boardwalk, have gained over 100% in the last 2 years ... And will drop with rising interest rates but likely not before 2013. Some ( private or public ) REITs over distribute ie over and above their FFO .. So erosion of principal is an issue if asset growth is not compensating for over distribution ! So, get an 8% yield but price drops 12% .. Overall ROI is then -4%. Thus, look for sustainability of distributions.


Essentially some of the "real estate syndication considerations" that I talked about last night at the BC REIN meeting.



You might get a 4-5% annual distribution, but many REITs now trade 10% lower than a year ago.



So distribution AND value of capital at risk both have to be looked at. REITs were certainly a great investment in 2009 and rose 200%+ from there in many cases, but today ?

 

[LAndersen]

Has anyone put money in to Invest Plus? Recommendations? Their website seems a little out of date,

 

[marksimon112]

To be sure you`re buying a REIT at a good price, compare its share price to its funds from operations, or FFO. FFO is calculated by adding back depreciation deductions to earnings. Tax law allows a company to write off the value of long-term assets to recognize their diminishing value over time. That`s a nice tax break, but it doesn't cost a REIT any cash, nor does it affect the value of a com­pany`s assets. And unlike, say, computers, real estate tends to gain, rather than lose, value over time.



Mark Simon

http://www.prestonsells.com

 

[bizaro86]

Another quick update on Lanesborough REIT. It's up big the last couple of days, and is now trading at $1.20, up from $0.36 when I mentioned it positively at the beginning of this thread. Those who bought then have done well. I'm updating this because I have now sold all my shares. I dislike it strongly when I don't understand large moves in a stock, and I don't believe the risk-reward ratio is favourable here. I'm also re-allocating funds to other stock investments I believe are more favourable, but won't mention them here since they're not real estate related. (see my blog if interested).



Lanesborough was a cheap option that's worked out. I'm not saying it won't go higher, but the risk of loss compared to the potential for gain doesn't allow me to hold it anymore. There may be some sort of takeover or other event upcoming that explains the recent rise, but I don't like gambling on that.



Regards,



Michael

 

[DonBurton]

I'd avoid all that at all cost. Walton International is the only company I'd ever consider, and even they aren't that great. The only thing good about them is they more than likely won't steal your money, or go broke. But even big names like Harvest Capital, Edgeworth, and many others have gone bankrupt. Most of those companies are total scams. I hate the fact that they come across as so legitimate, but then next thing you know the company is bankrupt and the owner has moved to the Bahamas. It's nuts. Trust me be careful on those. They promise you the world, but deliver very little. I'd avoid all those at all cost, I've done lots of that stuff in the past. Most costly learning experiences ever. Besides there's no leverage there at all. I'd just stick with the tried and true, buying property, that's it.

 

[bizaro86]

[quote user=DonBurton]I'd avoid all that at all cost. Walton International is the only company I'd ever consider, and even they aren't that great. The only thing good about them is they more than likely won't steal your money, or go broke. But even big names like Harvest Capital, Edgeworth, and many others have gone bankrupt. Most of those companies are total scams. I hate the fact that they come across as so legitimate, but then next thing you know the company is bankrupt and the owner has moved to the Bahamas. It's nuts. Trust me be careful on those. They promise you the world, but deliver very little. I'd avoid all those at all cost, I've done lots of that stuff in the past. That's something I should cover in my real estate training course. That will be the next chapter for sure. Most costly learning experiences ever. Besides there's no leverage there at all. I'd just stick with the tried and true, buying property, that's it.




Walton International talks about how great the performance was on their past investments. What they don't mention until a footnote in the back of a huge document is that now they uplift the land on the way in, and charge much higher fees after that. Obviously that will affect their performance in the future. Even if the land does just as well, a lot more of the value goes to them.



Plus, buying AB land will work out great in a boom, but gas prices are low, oil prices have been dropping, and the big companies are doing layoffs. I'd think long and hard about investing with Walton. Make sure you read and understand the whole pile of documents.



Regards,





Michael