Buying publicly traded REITS vs RE

7 Replies

Hi all,

Just a clarification, I do intend to ultimately own RE. However, as I am saving up to acquire a property, I have been investing in REITS (NYMT / ABR / NRZ / CIM / NLY / SKT). Right now, these REITS have dividend yields from a low of 8% to a high of 13%. Does anyone else invest in high dividend paying REITS as well?

Also, for a cash on cash return and from a headache perspective, is it potentially better to just buy REITS for the long term and be happy with a 13% div yield (which would be a 13% cash on cash return). I know from a tax, leverage, and appreciation play that RE will beat out REITS....however, by how much? Also, at least with a REIT there are no headaches (be it managing tenants or managing property managers).

In a quick glance most of these are not investing in RE directly they are mortgage loan originators or loan holders or provide management services, and as you pointed out you get less opportunity for appreciation.  The other problem with some of these is the payout ratio CIM for example is 338.98% according to Yahoo finance, so for every $1 they make they pay out more than $3 in dividends, which obviously isn't sustainable. NYMT is 186% etc. You can look the rest up yourself but my hunch is they'll follow a similar pattern.

Hey, @Aaron K. - nice first name!

What you say makes total sense. I will say, especially for NYMT in particular, this REIT has been within a relatively non-volatile market price for the past few years while maintaining its dividend.

Do you own properties?  Also, how did you build your pool of investable cash?

I also own and love CIM. I'be been wondering the same. I am an investment adviser as my day job.  Have been for 20 years.  

The taxation would be SIMILAR but not quite as advantageous if you owned it in a corporation. That yield is NET of your expenses. Hard to come by with no sweat equity and headaches.

However, you lose the benefit of leverage unless you use margin, but it would not be as extreme.

I think it's a great way to build your asset column then diversify with RE.

u do

Originally posted by @Aaron Holtzman :

How do you help your clients that want to get into the RE space?  

Thanks Aaron! Actually I do NOT get into RE with my clients. I use all liquid, listed, heavily traded investments like etfs, funds and an occasional listed REIT for the very well funded and risk oriented.

I have owned a 2 family in the past - 10 years ago -  and messed it up.  Now I'm back to learn before jumping in again!


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