Buying publicly traded REITS vs RE

[Aaron Holtzman]

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).

[Aaron K.]

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.