• MICHAEL LOFTUS

Investing In REIT's




Today, we're going to talk about how to invest in real estate, not for your home, but actually commercial real estate in your portfolio. So real estate, most of us as individuals hopefully own a home or would like to own a home. But real estate as an investment has been around for quite some time. To go back a little bit into my past experience, there's two parts that helped me understand real estate and how it works. First, when I was on the distribution side of the business, I helped create a product that was based on an institutional style of money management. What's that? Think of defined contribution plans, pension plans, foundations, endowments. Now, in this process, there were a couple of things. I worked specifically with Ibbotson Associates, since purchased by Morningstar. I was on the advisory board over a period of time as we built out this product. In that process, I came across an article called Mind the Gap. Why DC plans defined contributions, outperform DB plans, 401k’s, and Individual investors. Now, this has been updated several times over the years.


Here is the link https://larrysiegeldotorg.files.wordpress.com/2014/07/barclays-gap2000.pdf


I warn you, it is lengthy, but a good read.



Last year I had a great opportunity to hear a presentation from someone on Cornell's endowment. Now, no matter your school, everyone knows Villanova is mine. You can go to your school; they have their financial statements and they always have a page that is listed specifically to their investments.





Now, I took this right from Cornell's page. You can see it, Domestic equity, foreign equity, but what you can see here is real assets, hard assets, real estate. One of the top 4 holdings for Cornell, you buy real estate, you get that yield, hopefully also you get appreciation. That's why real estate is nice as an investment.


What type of real estate is there to invest in? You have real estate investment trusts (REITS) You could buy apartment REITS, retail, malls, grocery anchored, main on main where you have a bank on one corner, a gas station on another corner, and a Starbucks on the other. Storage, there are a lot of those! Health care, really good sector, lodging, high rises, industrials. There's all kinds of opportunities just like in the typical investment world.




So, what is a REIT and how does it work? Just like a mutual fund, or ETF. They buy individual stocks. REITS buy properties generally specific to the sectors that I mentioned earlier. So how do you as an individual investor invest in this? Now, before I go on, here's my disclosure. Like any investment, there are risk associated with it. Call me or any advisor and make sure you do your research.



I'm going to start in the spectrum of liquidity. We're going to start over here, which is nontraded REITS. What is good about these? One good thing is they adhere to the S.E.C. rules. You get 10K Q’s and all of the other filings. Everything does have to be disclosed. The problem here is liquidity. There was a time, even a few years ago, some of these REIT's were raising money and exiting, we will talk about that in a second. Bringing it to the public markets fairly quickly. So, you didn't have these long holds. A lot of these REITS today, if you look at them, they might be 7 to 10 year holds. You want to consider that. This is why liquidity is an issue. There's also been a new rule in this space where they have to reprice annually. Before, if you bought it at 10 dollars a share, it would always be 10 dollars. Now it re-prices annually. So, it's lost that non correlation feel with the market, that has been both good and bad. I still have a few left over from five years ago. Some have gone up; some have gone down. It can become fairly expensive. Another great reason to do your research.



Next, you have REITS in what's now called interval funds. So, what's the difference here? Well, let's talk about liquidity again, so now we're getting closer to full liquidity. Generally, most of these have quarterly liquidity. So, you can get to your money slash/sell to get to your money once a quarter. Some restrictions may apply, because they're different for every one of them. But generally, you should have access One the Quarter.




One of the nice things of Interval Funds, is it gives you public and private. What do I mean by that? You've got public REITS, trade on an exchange, so you're going to get that fluctuation. Then you're going to get private where you shouldn't see as much fluctuation. Either way, you're still going to get a quarterly distribution, hopefully, as long as they achieve their objectives.



Moving on to Mutual Funds, I don't generally do these. I prefer exchange traded funds (ETFS) You can do the same thing, buy a REIT exchange traded fund. In fact, it's been one of our top holdings since last November. Why? Well, I like the yield, but it actually has grown quite a bit this year. You can look it up, but why REIT's today? Well, interest rates go low. Any type of interest rate sensitive sectors does well…. REITS. Interest rates go down, borrowing power gets better, prices go up. It has been a really good sector this year. But here you've got full liquidity, you can get in and out on a daily basis. You also have a dividend for the potential for growth.



Last but not least is an individual stock. Obviously, you have liquidity. You can get in and out on a daily basis. But if you're buying an individual stock, of course, you have the potential to have more individual risk of that one company, which is why I like the ETF, because I can also go in and out. I actually have a few interval funds, but primarily all of my clients have been in REIT thru ETF’s this year, this doesn’t mean I'll always be in this space.


Now let’s talk about ETF and stocks. What I like about them, the charts! I like my charts. Everyone knows that. The charts allow me to look at both fundamentals and the technical, these are the charts that make my buying decision easier, more difficult to do with the other two options.





Here is my conclusion, REITS, Real Estate, hard assets. I love them. Just like the foundations, can’t forget about endowments. It is always good to keep your options open and look th normal spectrum of investments. It could be a good opportunity for yield. You do need to tread lightly, because the risk is definitely there. But if the opportunity is right it could be a great investment for you and your portfolio.


For any additional questions, please give us call!




57 views

GET STARTED

SCHEDULE A VIRTUAL APPOINTMENT

Being virtual means you do not have to leave the  safety and comfort of your home.  As long as you have a device and the internet, we can meet.  Meet us when it is convenient for you, from wherever you are. 

We can engage with you via Zoom, a secure venue or phone call  

Want us to contact you?  Just fill out the form below and we get back to you as soon as possible.

To schedule a meeting in person call our office at (302) 251-8901

MAILING ADDRESS:

32828 Reba Rd, Suite C

Millville, DE  19967

PHONE:

(302) 251-8901

Check the background of your financial professional on FINRA's BrokerCheck- https://brokercheck.finra.org The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by third parties to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

*Securities and advisory services offered through United Planners Financial Services, member FINRA, SIPC. Loftus Wealth Strategies and Untied Planners Financial Services are not affiliated. 

*We are licensed to sell Securities in DE,PA, MD,IL,NC. Insurance-related services may not be provided to individuals residing in any states other than DE,PA, MD,IL,NC.

302-251-8901

  • YouTube - White Circle
  • Facebook - White Circle
  • LinkedIn - White Circle
  • Twitter - White Circle