REITs

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
spanisharmada
Posts: 3
Joined: Sat Dec 26, 2020 4:52 am

REITs

Post by spanisharmada »

-Anyone have recommendations regarding REITs to invest in that offer consistent dividends and passive, cash flowing income?

-Also: RealityMogul, Crowdstreet, Fundrise or Cornell Capital Holdings: whats the best? Do any of them provide a low fee advisory service that can handle your investments, do the research for you and determine which projects are the best to fit for your goals? Looking for passive income, dividend paying deals.
Valuethinker
Posts: 42499
Joined: Fri May 11, 2007 11:07 am

Re: REITs

Post by Valuethinker »

There used to be a "REIT wrecks" website.

Every so often here, we get someone whose "adviser" put them into a private REIT, and it's a mess, and they can't get out. The result is years of suffering just trying to extract capital. If one does get out, it's usually at some massive discount to stated NAV, in the meantime one has had the privilege of paying 2,3% or more of NAV in management fees.

There's no gain, for 99% of people, over owning the quoted Vanguard REIT index fund. Which gives them liquidity.

There's a whole sub discussion about the TIAA RE annuity fund. Which has its merits, but again has liquidity constraints.

David Swensen also takes the reader through the private REIT "industry" and the harm it causes investors. No doubt Larry Swedroe has something pithy to say in his books.

And so... the standing advice here is don't, just don't.
CloseEnough
Posts: 119
Joined: Sun Feb 14, 2021 8:34 am

Re: REITs

Post by CloseEnough »

I’d look at TCREX, TIAA real estate fund, if you want to invest in real estate as an asset class.I don’t know if it checks all your boxes.

The prevailing view on this forum seems to be that total stock market funds cover this sector and it’s not a separate asset class. That view questions any diversification benefit and would claim that REITS are highly correlated with the market. The last ten years of performance supports that view, longer historical performance does not.
backpacker61
Posts: 658
Joined: Wed May 20, 2020 6:36 am

Re: REITs

Post by backpacker61 »

You could consider Cohen & Steers CEF's that hold REITs. These or the Vanguard fund mentioned would be my choice (I don't own any).

https://www.cohenandsteers.com/funds/closed-end-funds
“Now shall I walk or shall I ride? | 'Ride,' Pleasure said; | 'Walk,' Joy replied.” | | ― W.H. Davies
User avatar
Admiral Fun
Posts: 135
Joined: Mon Jun 04, 2012 8:04 pm

Re: REITs

Post by Admiral Fun »

CloseEnough wrote: Mon Apr 19, 2021 6:08 am I’d look at TCREX, TIAA real estate fund, if you want to invest in real estate as an asset class.I don’t know if it checks all your boxes.
That fund is just a reits fund like Vanguard’s but more expensive. I think you probably mean TIAA Real Estate (QREARX), which is directly owned commercial RE.

I have about 5% allocated to TREA. The main liquidity restriction is that you can only sell once a quarter.

I hold it in place of bonds. It is no doubt riskier than bonds but moves very slowly so you can get out in case of a major real estate crisis.

Right now it is returning about 8% on an annualized basis.
User avatar
watchnerd
Posts: 8565
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: REITs

Post by watchnerd »

CloseEnough wrote: Mon Apr 19, 2021 6:08 am I’d look at TCREX, TIAA real estate fund, if you want to invest in real estate as an asset class.I don’t know if it checks all your boxes.

The prevailing view on this forum seems to be that total stock market funds cover this sector and it’s not a separate asset class. That view questions any diversification benefit and would claim that REITS are highly correlated with the market. The last ten years of performance supports that view, longer historical performance does not.
0.79 ER on TCREX

1.83% yield

What's so great about it?
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% Alts || LMP TIPS/STRIPS || RSU + ESPP
Call_Me_Op
Posts: 8219
Joined: Mon Sep 07, 2009 2:57 pm
Location: Milky Way

Re: REITs

Post by Call_Me_Op »

CloseEnough wrote: Mon Apr 19, 2021 6:08 am I’d look at TCREX, TIAA real estate fund, if you want to invest in real estate as an asset class.I don’t know if it checks all your boxes.

The prevailing view on this forum seems to be that total stock market funds cover this sector and it’s not a separate asset class. That view questions any diversification benefit and would claim that REITS are highly correlated with the market. The last ten years of performance supports that view, longer historical performance does not.
Great summary CE!
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
Call_Me_Op
Posts: 8219
Joined: Mon Sep 07, 2009 2:57 pm
Location: Milky Way

Re: REITs

Post by Call_Me_Op »

watchnerd wrote: Mon Apr 19, 2021 7:02 am
CloseEnough wrote: Mon Apr 19, 2021 6:08 am I’d look at TCREX, TIAA real estate fund, if you want to invest in real estate as an asset class.I don’t know if it checks all your boxes.

The prevailing view on this forum seems to be that total stock market funds cover this sector and it’s not a separate asset class. That view questions any diversification benefit and would claim that REITS are highly correlated with the market. The last ten years of performance supports that view, longer historical performance does not.
0.79 ER on TCREX

1.83% yield

What's so great about it?
That's what you get when you want to own real estate with minimal leverage and you want someone else to handle all of the management activities and accept all of the liability.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
CloseEnough
Posts: 119
Joined: Sun Feb 14, 2021 8:34 am

Re: REITs

Post by CloseEnough »

watchnerd » Mon Apr 19, 2021 7:02 am


0.79 ER on TCREX

1.83% yield

What's so great about it?
Nothing so great, as the Admiral has noted, it is just a fund like the Vanguard index fund, but more expensive. I'm not all in on index funds for everything. So, if one wanted to look at an actively managed fund in this area, this might be one to consider. Morningstar seems to agree.

Help me understand why you only look at yield in evaluating this fund? If the fund has returned over 12% YTD is that no consideration for you?
User avatar
watchnerd
Posts: 8565
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: REITs

Post by watchnerd »

Call_Me_Op wrote: Mon Apr 19, 2021 7:34 am

That's what you get when you want to own real estate with minimal leverage and you want someone else to handle all of the management activities and accept all of the liability.
It doesn't own real estate.

It's just holds REITs like a REIT index does.
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% Alts || LMP TIPS/STRIPS || RSU + ESPP
Call_Me_Op
Posts: 8219
Joined: Mon Sep 07, 2009 2:57 pm
Location: Milky Way

Re: REITs

Post by Call_Me_Op »

watchnerd wrote: Mon Apr 19, 2021 7:54 am
Call_Me_Op wrote: Mon Apr 19, 2021 7:34 am

That's what you get when you want to own real estate with minimal leverage and you want someone else to handle all of the management activities and accept all of the liability.
It doesn't own real estate.

It's just holds REITs like a REIT index does.
I don't think so. See attached. The phrase "directly-held real estate" is used more than once.

https://www.tiaa.org/public/pdf/performance/REA_FAQ.pdf
Last edited by Call_Me_Op on Mon Apr 19, 2021 7:59 am, edited 1 time in total.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
User avatar
watchnerd
Posts: 8565
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: REITs

Post by watchnerd »

CloseEnough wrote: Mon Apr 19, 2021 7:45 am If the fund has returned over 12% YTD is that no consideration for you?
It's no consideration to me when 12% YTD is the same thing I would get from TSM for an ER 1/10th of that.
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% Alts || LMP TIPS/STRIPS || RSU + ESPP
User avatar
watchnerd
Posts: 8565
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: REITs

Post by watchnerd »

Call_Me_Op wrote: Mon Apr 19, 2021 7:58 am
watchnerd wrote: Mon Apr 19, 2021 7:54 am
Call_Me_Op wrote: Mon Apr 19, 2021 7:34 am

That's what you get when you want to own real estate with minimal leverage and you want someone else to handle all of the management activities and accept all of the liability.
It doesn't own real estate.

It's just holds REITs like a REIT index does.
I don't think so. See attached. The phrase "directly-held real estate" is used more than once.

https://www.tiaa.org/public/pdf/performance/REA_FAQ.pdf
????

I don't think what you're linking to is TCREX

https://www.morningstar.com/funds/xnas/tcrex/portfolio

Simon Property Group Inc
Prologis Inc
American Tower Corp
Equinix Inc
Equity Residential
AvalonBay Communities Inc
Crown Castle International Corp
Rexford Industrial Realty Inc
Public Storage
Welltower Inc
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% Alts || LMP TIPS/STRIPS || RSU + ESPP
CloseEnough
Posts: 119
Joined: Sun Feb 14, 2021 8:34 am

Re: REITs

Post by CloseEnough »

by Admiral Fun » Mon Apr 19, 2021 6:45 am

That fund is just a reits fund like Vanguard’s but more expensive. I think you probably mean TIAA Real Estate (QREARX), which is directly owned commercial RE.

I have about 5% allocated to TREA. The main liquidity restriction is that you can only sell once a quarter.

I hold it in place of bonds. It is no doubt riskier than bonds but moves very slowly so you can get out in case of a major real estate crisis.

Right now it is returning about 8% on an annualized basis.
AF: thanks for pointing this out, I will take another look at TREA. For me, it would mean moving some $ out of TIAA traditional (liquid) with guarantee of 3%, so I am not likely to do that, which will leave me with "just a reits fund" which I can access through a Roth. So, if I want exposure to real estate as a separate asset class, for diversification, which fund, and whether to index in real estate or go actively managed.
wolf359
Posts: 2377
Joined: Sun Mar 15, 2015 8:47 am

Re: REITs

Post by wolf359 »

spanisharmada wrote: Mon Apr 19, 2021 1:20 am -Anyone have recommendations regarding REITs to invest in that offer consistent dividends and passive, cash flowing income?

-Also: RealityMogul, Crowdstreet, Fundrise or Cornell Capital Holdings: whats the best? Do any of them provide a low fee advisory service that can handle your investments, do the research for you and determine which projects are the best to fit for your goals? Looking for passive income, dividend paying deals.
I believe in investing in REITs. I disagree with the premise that they're highly correlated with the stock market. 2008 was a real estate bubble, so when stocks crashed, REITs crashed more. But in other market crashes, REITs behaved differently than the overall market. When used as part of an asset allocation and rebalanced regularly, REITs work for me.

I use a small percentage to diversify my portfolio (about 7%-10% of Asset Allocation), and I like how it makes the overall portfolio behave.

However, I only use the Vanguard REIT index. I don't want single stock risk of picking just one company. I also want that REIT to be publicly traded, not private, so I can liquidate it on the secondary market.

The new crowd sourcing options are essentially private REITs or a single management company. You could compare them to one of the publicly traded REIT companies, and find the public companies are more transparent, more liquid, have greater assets under management, and have a longer track record. But again, why would I take a risk on putting significant assets into just one company?
CloseEnough
Posts: 119
Joined: Sun Feb 14, 2021 8:34 am

Re: REITs

Post by CloseEnough »

Here is some interesting analysis and information:

https://fundrise.com/education/vanguard ... reit-level
rick51
Posts: 130
Joined: Mon Sep 14, 2009 7:33 pm
Location: Maryland

Re: REITs

Post by rick51 »

How would you expect a REIT Fund to behave during a period of high inflation? It looks like portfolio visualizer only has data on REITs as an asset class back to 1994. I’m thinking 1970 - 1982ish.
Call_Me_Op
Posts: 8219
Joined: Mon Sep 07, 2009 2:57 pm
Location: Milky Way

Re: REITs

Post by Call_Me_Op »

watchnerd wrote: Mon Apr 19, 2021 8:01 am
Call_Me_Op wrote: Mon Apr 19, 2021 7:58 am
watchnerd wrote: Mon Apr 19, 2021 7:54 am
Call_Me_Op wrote: Mon Apr 19, 2021 7:34 am

That's what you get when you want to own real estate with minimal leverage and you want someone else to handle all of the management activities and accept all of the liability.
It doesn't own real estate.

It's just holds REITs like a REIT index does.
I don't think so. See attached. The phrase "directly-held real estate" is used more than once.

https://www.tiaa.org/public/pdf/performance/REA_FAQ.pdf
????

I don't think what you're linking to is TCREX

https://www.morningstar.com/funds/xnas/tcrex/portfolio

Simon Property Group Inc
Prologis Inc
American Tower Corp
Equinix Inc
Equity Residential
AvalonBay Communities Inc
Crown Castle International Corp
Rexford Industrial Realty Inc
Public Storage
Welltower Inc
I must have confused this with TIAA Real Estate Account (a variable annuity frequently discussed here). My apologies.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
Call_Me_Op
Posts: 8219
Joined: Mon Sep 07, 2009 2:57 pm
Location: Milky Way

Re: REITs

Post by Call_Me_Op »

rick51 wrote: Mon Apr 19, 2021 8:54 am How would you expect a REIT Fund to behave during a period of high inflation? It looks like portfolio visualizer only has data on REITs as an asset class back to 1994. I’m thinking 1970 - 1982ish.
They are stocks - so probably will be a poor short-term hedge but good long-term hedge.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
User avatar
AerialWombat
Posts: 2125
Joined: Tue May 29, 2018 1:07 pm
Location: Cash Canyon / Cashville

Re: REITs

Post by AerialWombat »

FSRNX, Fidelity Real Estate Index, is the only holding in my Roth and HSA accounts. As some BH’ers would say, “it’s a fine fund” if you want such exposure. .07 ER. Holds a broad swath of the REIT universe, plus some non-REIT real estate industry stocks.
For entertainment purposes only.
User avatar
watchnerd
Posts: 8565
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: REITs

Post by watchnerd »

rick51 wrote: Mon Apr 19, 2021 8:54 am How would you expect a REIT Fund to behave during a period of high inflation? It looks like portfolio visualizer only has data on REITs as an asset class back to 1994. I’m thinking 1970 - 1982ish.
Vanguard's paper on TIPS and commodities found REITs to do a hair better than regular stocks, but don't even come close to the best assets for dealing with inflation.
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% Alts || LMP TIPS/STRIPS || RSU + ESPP
tibbitts
Posts: 13590
Joined: Tue Feb 27, 2007 6:50 pm

Re: REITs

Post by tibbitts »

CloseEnough wrote: Mon Apr 19, 2021 8:09 am
by Admiral Fun » Mon Apr 19, 2021 6:45 am

That fund is just a reits fund like Vanguard’s but more expensive. I think you probably mean TIAA Real Estate (QREARX), which is directly owned commercial RE.

I have about 5% allocated to TREA. The main liquidity restriction is that you can only sell once a quarter.

I hold it in place of bonds. It is no doubt riskier than bonds but moves very slowly so you can get out in case of a major real estate crisis.

Right now it is returning about 8% on an annualized basis.
AF: thanks for pointing this out, I will take another look at TREA. For me, it would mean moving some $ out of TIAA traditional (liquid) with guarantee of 3%, so I am not likely to do that, which will leave me with "just a reits fund" which I can access through a Roth. So, if I want exposure to real estate as a separate asset class, for diversification, which fund, and whether to index in real estate or go actively managed.
You specifically, being that you have 3% liquid traditional, can roll over other deferred funds to TIAA and place that in the Real Estate account. Whether you want to is up to you. You may or may not be able to roll money into a 3% Traditional account at TIAA, depending on terms of your plan.

Having said that it is extremely misleading to say it's "returning 8% on an annualized basis" or that you can "get out in case of a major real estate crisis." Yes, the shares move slowly, but arguably there's been only one event in the entier history of the fund that turned out to be a sigificant timing opportunity. There is also the possibility of being mislead by what turn out to be temporary leading indicator trends, particular now that lead time has been substantially reduced by new valuation procedures. Whereas before you could wait for a multi-month indicator trend to time the fund, to avoid being misled by temporary indicator dips, today by that time the factors that caused that trend would be at least partly or mostly incorporated into the fund price. And the potential benefit from timing has been reduced somewhat by the new $150k liquidity restrictions. As for "8%", all you can say it has in the past year or whatever time period returned a certain percentage. A year ago would someone have said "right now it's returning about 8%"? No, they would have said "right now it's returning about 0%" Yet in the following year, it's returned about 8%. So, if 0% "predicts" 8%, what does 8% predict?
Valuethinker
Posts: 42499
Joined: Fri May 11, 2007 11:07 am

Re: REITs

Post by Valuethinker »

The US REIT index fund has relatively little of the usual suspects (shops & offices) in it.

But over 60% of rent on UK commercial properties was *unpaid* as of March 31st. This is an industry living on the hope that it might, someday, have tenants paying again.

My employer is looking at moving to 2-3 days a week in the office maximum, and a 50% reduction in office space to economize on costs. How about yours?

We are at one of those great inflection points, I think. Where something which might have changed over 20-30 years, is forced to change in a fraction of that. Some of these offices will be converted into residential of course. But what are we going to do with all offices? High Street stores and shopping malls?

This does not make me want to own shops & offices. Prologis is obviously different.

So that's the UK commercial property market, the dead steady core asset, much safer that stocks. Saw investors through the 1930s. Saw them again through the inflation of the 1970s. The core UK pension fund and insurance asset.

And it is as dust.

I know about the Efficient Market Hypothesis. I know I can't know any better than the market's collective valuation of these things.

But a business where over 60% of your revenue is just ... unpaid?
wolf359
Posts: 2377
Joined: Sun Mar 15, 2015 8:47 am

Re: REITs

Post by wolf359 »

CloseEnough wrote: Mon Apr 19, 2021 8:32 am Here is some interesting analysis and information:

https://fundrise.com/education/vanguard ... reit-level
According to this analysis, Fundrise is superior to publicly traded REITs.

Source: Fundrise

Hmmm.
LateFire
Posts: 35
Joined: Sun Dec 27, 2020 8:38 am

Re: REITs

Post by LateFire »

VNQ, VNQI, or RQI.
Dunning-Kruger cognitive test: People think they are more capable than they really are. Sufferers don't know how much they don't know, and the most ignorant are the most confident.
CloseEnough
Posts: 119
Joined: Sun Feb 14, 2021 8:34 am

Re: REITs

Post by CloseEnough »

wolf359 » Mon Apr 19, 2021 11:20 am



https://fundrise.com/education/vanguard ... reit-level
According to this analysis, Fundrise is superior to publicly traded REITs.

Source: Fundrise

Hmmm.
Ha! So true. Of course a mutual fund company would never claim their approach to investing is superior, and provide analysis to support it.

It is just information. I would not claim they are superior, based on their own analysis, just found it interesting, as I think they do provide some information, not just "we are superior" - they give reasons why, which you can question. I'm no expert but reading the analysis in the link to Fundraise, it seems to me a lot of what they claim is true. Are there specific points in the analysis that you disagree with or just don't like that they use analysis to say they are better? Wish I knew. Obviously, an unbiased source would be better, if there is such a thing.
BestCoast123
Posts: 113
Joined: Fri Jul 17, 2020 4:45 pm

Re: REITs

Post by BestCoast123 »

rick51 wrote: Mon Apr 19, 2021 8:54 am How would you expect a REIT Fund to behave during a period of high inflation? It looks like portfolio visualizer only has data on REITs as an asset class back to 1994. I’m thinking 1970 - 1982ish.
Depends on the Real Estate (and the Real Estate Debt). The fixed-rate debt is negative duration and is a great inflation hedge. However, most investment real estate has duration risk due to the lease terms. For instance, a NNN lease could have a 5-, 10-, 15-year lease plus a bunch of renewal options. If inflation takes off, the odds of those now below-market renewal options being exercised increases.

The duration exposure at the asset level is a function of the average remaining lease term (adjusted for any renewal options). When the lease is over, rents can be renegotiated to "market". Long-story short, "it depends."

Hotels have short-term leases (1 day, etc.).
Apartments typically have 1-year or less leases, so are less sensitive to the duration (at the asset level).
Office / industrial can be a mix of lease terms.
Retail can be a mix of lease terms.
NNN typically has longer initial lease terms and lots of renewal options.
CloseEnough
Posts: 119
Joined: Sun Feb 14, 2021 8:34 am

Re: REITs

Post by CloseEnough »

tibbitts wrote: Mon Apr 19, 2021 10:34 am You specifically, being that you have 3% liquid traditional, can roll over other deferred funds to TIAA and place that in the Real Estate account. Whether you want to is up to you. You may or may not be able to roll money into a 3% Traditional account at TIAA, depending on terms of your plan.

Having said that it is extremely misleading to say it's "returning 8% on an annualized basis" or that you can "get out in case of a major real estate crisis." Yes, the shares move slowly, but arguably there's been only one event in the entier history of the fund that turned out to be a sigificant timing opportunity. There is also the possibility of being mislead by what turn out to be temporary leading indicator trends, particular now that lead time has been substantially reduced by new valuation procedures. Whereas before you could wait for a multi-month indicator trend to time the fund, to avoid being misled by temporary indicator dips, today by that time the factors that caused that trend would be at least partly or mostly incorporated into the fund price. And the potential benefit from timing has been reduced somewhat by the new $150k liquidity restrictions. As for "8%", all you can say it has in the past year or whatever time period returned a certain percentage. A year ago would someone have said "right now it's returning about 8%"? No, they would have said "right now it's returning about 0%" Yet in the following year, it's returned about 8%. So, if 0% "predicts" 8%, what does 8% predict?


Thank you for your insights and thoughtful response.
summit
Posts: 66
Joined: Mon Aug 18, 2014 10:29 am
Location: Out West

Re: REITs

Post by summit »

I’m a big fan of Simon (SPG).
People first, then money, then things.
User avatar
Aslan18
Posts: 16
Joined: Mon Feb 15, 2021 8:55 am

Re: REITs

Post by Aslan18 »

wolf359 wrote: Mon Apr 19, 2021 8:26 am
spanisharmada wrote: Mon Apr 19, 2021 1:20 am -Anyone have recommendations regarding REITs to invest in that offer consistent dividends and passive, cash flowing income?

-Also: RealityMogul, Crowdstreet, Fundrise or Cornell Capital Holdings: whats the best? Do any of them provide a low fee advisory service that can handle your investments, do the research for you and determine which projects are the best to fit for your goals? Looking for passive income, dividend paying deals.
I believe in investing in REITs. I disagree with the premise that they're highly correlated with the stock market. 2008 was a real estate bubble, so when stocks crashed, REITs crashed more. But in other market crashes, REITs behaved differently than the overall market. When used as part of an asset allocation and rebalanced regularly, REITs work for me.

I use a small percentage to diversify my portfolio (about 7%-10% of Asset Allocation), and I like how it makes the overall portfolio behave.

However, I only use the Vanguard REIT index. I don't want single stock risk of picking just one company. I also want that REIT to be publicly traded, not private, so I can liquidate it on the secondary market.

The new crowd sourcing options are essentially private REITs or a single management company. You could compare them to one of the publicly traded REIT companies, and find the public companies are more transparent, more liquid, have greater assets under management, and have a longer track record. But again, why would I take a risk on putting significant assets into just one company?
+1
Impossible is a word to be found only in the dictionary of fools. ~ Napoleon Bonaparte
wolf359
Posts: 2377
Joined: Sun Mar 15, 2015 8:47 am

Re: REITs

Post by wolf359 »

CloseEnough wrote: Mon Apr 19, 2021 11:35 am
wolf359 » Mon Apr 19, 2021 11:20 am



https://fundrise.com/education/vanguard ... reit-level
According to this analysis, Fundrise is superior to publicly traded REITs.

Source: Fundrise

Hmmm.
Ha! So true. Of course a mutual fund company would never claim their approach to investing is superior, and provide analysis to support it.

It is just information. I would not claim they are superior, based on their own analysis, just found it interesting, as I think they do provide some information, not just "we are superior" - they give reasons why, which you can question. I'm no expert but reading the analysis in the link to Fundraise, it seems to me a lot of what they claim is true. Are there specific points in the analysis that you disagree with or just don't like that they use analysis to say they are better? Wish I knew. Obviously, an unbiased source would be better, if there is such a thing.
It isn't "just information." It's marketing material. They're taking the primary objections to why people wouldn't invest in them, and they attempt to address them.

They cherry-pick facts and make an analysis in an attempt to sell you on the product.

For example, they address costs. The Vanguard REIT Index Fund has an expense ratio of 0.12%. FundRise uses the expense ratio for the Investors Shares version, which is 0.3%. Except that the Admiral Shares version had its minimum investment dropped to $3,000, and the Investors Shares are no longer available. If you don't have $3,000, you can invest in a single share of the Vanguard REIT ETF, So Vanguard has a lower minimum investment, is transparent so you can see the costs and the value of your investment at any time, can cash it out at any time, and has fees that are 1/10 that of FundRise.

They then argue that real estate management companies actually have other expenses and costs that don't make it into the expense ratio, but then they don't explain that they actually have the same costs. So comparing expense ratios is actually an apples to apples comparison. How significant are these fees? Run a compound interest calculator over a 30 year time period, assuming a return of 6% (or whatever return you want to assume.) Then run that calculation again, only subtract 1% (to account for the 1% expense ratio.) What's the result? The longer you hold this fund, the more the 10X higher expense ratios compound against you. Paying an expense ratio 10X what Vanguard charges will have a huge negative impact on your returns over time.

They make the argument that having liquidity results in a liquidity premium. They try to argue that privately traded assets are better, because they have a better opportunity to hunt for deals. They use the example of BlackRock going public, in which their REIT assets inflated once they were publicly traded. This meant it was better to hold BlackRock when it was private, so you could take advantage of the valuation bump when it went public. This isn't an example of the superiority of private over public. Rather, it's an example of the benefits of being an early stage investor in an IPO. And they forget to point out that since they intend to stay private, you will never get that bump yourself. You're still the last investor into the fund, only in FundRise, they don't have to provide accurate or current valuations, they get to control all the financial information, and they don't have to give you fair market value for your shares when you cash out.

I can go on and on with each of their arguments, but I think I'll stop here. It's not worth my time. I don't think FundRise is bad or not worth investing in, but they haven't yet convinced me why I should do so.

When you read marketing material like this, you need to actually evaluate what they're saying, and you need to challenge their facts and assumptions. I expect marketing material to be biased. But you can read between the lines of this paper and see what the biggest objections to their product are. You can then extrapolate those arguments and determine if they truly address them, or just wave their hands and shout "SQUIRREL!"
User avatar
Admiral Fun
Posts: 135
Joined: Mon Jun 04, 2012 8:04 pm

Re: REITs

Post by Admiral Fun »

tibbitts wrote: Mon Apr 19, 2021 10:34 am Having said that it is extremely misleading to say it's "returning 8% on an annualized basis" or that you can "get out in case of a major real estate crisis." Yes, the shares move slowly, but arguably there's been only one event in the entier history of the fund that turned out to be a sigificant timing opportunity. There is also the possibility of being mislead by what turn out to be temporary leading indicator trends, particular now that lead time has been substantially reduced by new valuation procedures. Whereas before you could wait for a multi-month indicator trend to time the fund, to avoid being misled by temporary indicator dips, today by that time the factors that caused that trend would be at least partly or mostly incorporated into the fund price. And the potential benefit from timing has been reduced somewhat by the new $150k liquidity restrictions. As for "8%", all you can say it has in the past year or whatever time period returned a certain percentage. A year ago would someone have said "right now it's returning about 8%"? No, they would have said "right now it's returning about 0%" Yet in the following year, it's returned about 8%. So, if 0% "predicts" 8%, what does 8% predict?
I would call my statement “slightly misleading”, rather than “extremely misleading”

Here’s why:
1. The current return is a good predictor of future return for the next few months. New information is priced in slowly as properties are reassessed quarterly.
3. Since 2010 (when TREA made changes to reduce market timing), Greenstreet Premium to NAV has an R2 of .75 with TREA return for the following year.

So... When you have a current return that exceeds bonds and an above average premium to NAV, prospects are bright for the coming year. If both of these turn sharply negative you can get out before too much damage is done. It’s like jumping off a slow motion train wreck. And if you are wrong it is unlikely that you will miss some huge rally.

I don’t advise hopping in and out all the time, but you can limit the downside losses.
User avatar
Doc
Posts: 10009
Joined: Sat Feb 24, 2007 1:10 pm
Location: Two left turns from Larry

Re: REITs

Post by Doc »

In the link given somewhere: viewtopic.php?f=1&t=346582
Valuethinker wrote:David Swensen also takes the reader through the private REIT "industry" and the harm it causes investors. No doubt Larry Swedroe has something pithy to say in his books.
Swedroe wrote:Instead, the winning strategy is to hold as much equity as possible in taxable accounts and hold taxable fixed-income investments and tax inefficient REITs in tax deferred accounts.
"The Only Guide to a Winning Investment Strategy You'll Ever Need" Swedroe & Hempen first edition p203
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
LateFire
Posts: 35
Joined: Sun Dec 27, 2020 8:38 am

Re: REITs

Post by LateFire »

I like VNQ, VQI, and RQI as far as REITs are concerned.
Dunning-Kruger cognitive test: People think they are more capable than they really are. Sufferers don't know how much they don't know, and the most ignorant are the most confident.
investuntilimrich
Posts: 49
Joined: Thu Jan 21, 2021 2:33 pm

Re: REITs

Post by investuntilimrich »

I put 1k into fundrise just as a test. I made around 3.00 after the first quarter we shall see if it goes up over time as projects are added to the account but i probably wont add funds
Post Reply