reit investments

reit investments questions and answers

Learn about reit investments at the number one young investor website Teen Analyst.

Q: In average, how much will I earn on a $25K investment in REIT?
and would it be a good idea to invest $25K and reinvest for the next 20 years? Whats the est. ROI in 20 years? Im trying to get the good feelings before I look for trustworthy REIT I can invest. Thanks!

A: This is a very difficult question to answer. There is specific roi you can expect from an REIT. They vary considerably. I do not even know of any accumulated statistics going back for 20 years. One of the largest REITs is Simon Property--shopping malls. Their 10 year average annual return has been 16%. Equity Residential, a large apartment REIT has a 10 year average annual return of 11%. I would not expect those type of returns for the next 20 years however. Think more in the order of 8-10%. Fidelity Real Estate Investment Portfolio, a collection of REITs has returned about 11% since its inception. Over 10 years but I do not know when it was begun.

Q: What Japan Real Investment Trust(REIT) has Collin Francis as manager?
This REIT is probably new, maybe 3-4 yrs.old.

A: If you’ve heard me speak this year, you’ve heard me talk about Japanese real estate... I think it’s the best investment opportunity for the next 15 years... I strongly believe that the investment I’ll share with you today has virtually no downside. Yet the upside potential is hundreds of percent. You see, right now, we’ve got the setup conditions for a ridiculous bull market in real estate in Japan. It’s really a “one-way bet.” It’s cheap, hated, and the uptrend is just beginning. Up until just a few months ago, property prices in Japan had been falling – for 16 years straight. The government had tried everything to entice people to spend their money. The Bank of Japan (Japan’s equivalent of the U.S. Federal Reserve) even went as far as lowering short-term interest rates to 0% – and it kept interest rates there for five years. Long-term interest rates are around 2% in Japan. Amazingly, property prices continued to fall, even in a low-interest world. Think about this for a moment... what do you think would happen to U.S. real estate prices if mortgage rates went from 6% to 2%? Real estate prices would soar... Most people don’t shop for homes based on the sticker price. It’s nearly irrelevant. Instead, most people buy based on what they can afford in a monthly payment. You see, at 6% interest, a $1,500 monthly payment will get you a mortgage of $250,000. Yet at a 2% interest rate, a $1,500 monthly payment will get you a mortgage of $400,000. In the U.S., we take it for granted that if mortgage rates fell from 6% to 2%, prices would soar. Americans believe that “you can’t go wrong in real estate.” However, after 16 years of falling prices, the Japanese now believe that “you’ll never make money in real estate.” Real estate prices in Japan fell between 50% and 90% from 1990 to 2000 (depending on where in Japan and what type of real estate we’re talking about). And they’ve stayed down. Now – finally – the Japanese are starting to buy real estate once again. And prices are starting to rise. The thing that kicked off the bust back in 1990 was the Bank of Japan raising interest rates too fast. And today, the Japanese government will do everything in its power to prevent going back into bust mode. It will NOT get in the way as property prices start to rise. And it will do everything possible to keep prices from falling. Therefore, we’ve got a one-way bet. Let me sum up the important details: • Prices are down 50%-90% in the last 16 years, but rising now. • Mortgage rates are ridiculously low. • The Japanese people are sitting on more cash than anyone. • The government will fuel the fire instead of put it out. Here’s How to Play It... The most profitable, and safest way to play this situation is with Japanese REITs. If you’re not familiar with REITs, (pronounced "reet") or Real Estate Investment Trusts, they are a similar to stocks... but unlike stocks, they get a special tax break that many companies don’t get. And in return, they have to by law pass on their earnings to you, the shareholder. And the best way to play Japanese real estate is through one REIT that owns apartments in Tokyo. The company actually sells for less than the liquidation value of its buildings. And it currently pays out nearly all the profits it receives from rent in the form of dividends... I expect that dividend will be about 5% a year. I like this play for a variety of reasons. But mostly because it fits into my philosophy of buying what’s cheap and hated, when the uptrend is just beginning. It is extremely hard to get all of these at once. But we have them in Japanese residential properties now. Another reason I like the stock is the folks behind it. Instead of being part of the old-boy network in Japan, where you can only deal with your old cronies, this business was started by an interesting American. His name is Collin Francis. Collin Francis first went to Japan at age 19 as a missionary. Now in his mid-40s, Francis has worked in Japanese investments for two decades. According to Barron’s, he worked in Tokyo in the 1980s with Nikko Securities and Shearson Lehman, and he worked with Deutsche Morgan Grenfell in the early 1990s. In 1994, he started his own company. By 2005, Collin was managing a billion dollars in Japanese stocks. In 2002, Francis had the foresight to see that Japanese real estate was going to bottom out soon. So in 2002 he got the wheels in motion to get a REIT started in Japan. Collin Francis had the IPO of his apartment REIT just over a year ago. And today, this stock is the cheapest way for you to buy into Japanese real estate... By buying the stock now, you are actually buying at less than the liquidation value of the company’s properties! If Collin Francis sold all the apartments today, and gave us our money, we’d get more money than the stock is worth now. It’s crazy. When we compare Francis’ REIT with the four largest REITs in Japan, we can easily see what kind of value we’re looking at... COMPARING THE BIG REITS TO OURS Market Value (in US$ millions) Dividend Yield Price-to-Book Value Nippon Building Fund 5,312 3.1% 1.77 Japan Real Estate Investment 2,966 3.3% 1.70 Japan Retail Fund Investment 2,220 3.6% 1.42 Nomura Real Estate Office Fund 1,869 3.1% 1.73 Collin Francis’ REIT 244 4.4% 0.82 Sources: Datastream and www.tse.or.jp/english The far right column tells the story... most REITs in Japan trade at significant premiums to the value of the properties they own. The far right column shows the price-to-book-value, which represents purchase price, not market price. It shows that you only pay 82 cents for every dollar of property the REIT owns! The REIT bought its properties very recently – it just had its IPO last year. And while the price of shares may seem high you’re able to buy in for a steal... at 82 cents on the dollar. The business this company is in is not complicated... It simply owns 42 apartment buildings in Tokyo. Prospect’s occupancy rate is 95.1%. The property market in Japan is just about to go nuts. And thanks to this REIT, American investors can get in on the action with just a simple phone call. New laws passed in Japan from 1996 to 2002 have deregulated the industry and allowed REITs to be publicly traded like stocks. In the U.S., our massive boom is coming to an end. In Japan, their massive boom is just about to begin. If you get on board now, with Collin Francis’ REIT, you’ll be an instant real estate mogul in Japan, owning an interest in 42 apartment buildings in Tokyo... Be proud that you bought them for less than liquidation value... And enjoy your dividends, which could be as high as 5% as we see substantial price appreciation over both the near term and the long term. Your upside potential here is triple digits. I would like to hold this one for a very long time. If you like the sound of this investment idea and would like to learn more, I suggest you act quickly. But I have to warn you... A Warning This is not your typical stock investment. I can almost guarantee you will not hear about this unique investment anywhere else. It might be too unconventional for you. So, if you want to take advantage of this market, I recommend you first read my new investment research report on this situation. This research report is called; FINALLY! The 16-Year Bear Market Just Ended... It's Time to Buy. You can have a free look at this report before you decide whether or not this investments are right for you. It couldn't be easier to participate. One phone call is all you need to get started. It's happened over and over again in the past few years... I find unusual opportunities which I simply can't recommend to my True Wealth newsletter subscribers... I had to keep these ideas to myself. But now I've figured out a way to share these kinds of limited opportunities with you... if you're interested.

Q: What is the proper way to set up a REIT?
Looking to set up a real estate investment trust, looking for guidelines, best practices and sample business plans. Thanks.

A: This takes lots of time and experience to set up such an entity. There are certain SEC, state and other federal regulations that you are required to comply with before you can get one off the ground. You also have to know what you want to invest in apartments income residential, land and forest, warehouses, office buildings, raw land, construction, pre-construction, buy-outs or whatever you decided you decide to invest in. Then there are the investors with the required reports, annual, quarterly as well as monthly. You can check out the various kinds in your state by utilizing your Yahoo or Google window and typing in REIT for California (Your state) I find that a limited partnership works just fine starting out in the real investment business and allow it to grow as you get to know the investors, what they are seeking, the type of investments you want to do. They are not too complicated and will give you the experience you need. A limited Partnership can be done in a couple of weeks and if you get a good person that know how to do them you can form one in a week or so. With a limited partnership each investor is responsible for his own taxes and once the project is finished the limited partnership dies. Once you have done several of these and if you still want to do the REIT you will have experience and knowledge about the things that you personally want to accomplish with your REIT and the type you want to be involved in. I hope this has been of some use to you, good luck. "FIGHT ON"

Q: Any REIT ETF for recommedation?
With the downturn in the U.S. Economy, the various REIT ETF are affected. However, REIT ETF is said to be more safe than the usual investment. Any REIT ETF for recommedation?

A: Indeed there are quite a few to choose from. Maybe 15 more or less. Also open ended mutual funds. It might be easiest to eliminate the ones that appear to be the riskiest at the moment. One to avoid would be RTL and also FTY--retail. Another REM--mortgage. One that might be worth a look is REZ. Invests in apartment REITs. All those folks loosing their McMansions will have to live somewhere. Distribution rate is kind of pathetic--2.5% RWR is 15% malls but it does have a decent distribution--4.5%. It might be a possibility. FRI is similar but has a slightly higher distribution. 5% RNP is not an index fund but it is an etf, so it counts. This currently sells at about 5% below net assets. That is a plus. It currently pays about 12%. That is a plus. It pays monthly. Another plus. It is not all REIT. Some preferred. Another plus. Down 28% in 2007, a big minus. Up 8% in 2008, a big plus. This should be on your short list. In the same mold is RTU. A little different make up but not much so. Has some utility holdings. Pays 9.7%. Down 2% in 2007 but down 11% in 2008. Utilities make up 25% of its holdings. Currently sells at 11% discount to net assets. Another for your consideration. There are some index funds that invest in overseas real estate but they are not REIT type funds so I am not considering them here.

Q: Are REIT funds still a good investment idea?
What are some good mutual fund investment ideas? What are some good stocks to invest in?

A: I am not in favor of REIT's even though I do own one. One's such as Duke, which invests in comercial property, is probably preferable to some others such as apartment REIT's. But it does not hurt your diversification to own a few. I have been known to be wrong--a lot. I am in favor of IIF and TDF, two closed end funds that invest in India and China. TDF is the better bargain because Chinese stocks are selling at a lower PE than Indian stocks. Also in favor of solid large caps which are selling at some of the lowest PE's seen in a very long time. JNJ, MMM, HD. But as I said I have been wrong frequently. I thought that Dell was a buy at 33. Ha ha.

Q: Will there will be substantial growth in the REIT (Real Estate Investment) sector of the economy?


A: I've been to a Realtor meeting not too long ago and one of the market analysts suggested that the real estate market as a whole is still in a downward trend and will continue to be through the beginning of 2010. There were many charts and numbers as well as historical documentation to back up his claims. In the seminar it is well known that many different local markets will not experience a bubble burst and some others will not experience a boom. So to go back to your question, if the REIT has its holding based on a particular local real estate market, research that market to see if they have experienced a bust or if they are in a boom. Would I invest in a REIT? yes, if it was involved in development and expansion in the plains states (Kansas Nebraska, Oklahoma, Texas) which are great markets to look forward to in the future.

Q: We had our Vestin Fund shares changed to a REIT?
We sold the REIT at a loss of about $50,000 from our orinigal investment of $100,000. Can anyone tell us how to report this to IRS for tax purposes. What bases do we use for reporting?

A: Schedule D Form 1040. Depending on how long it was held as to whether it is short term or long term. Report Cost of $100,000 and proceeds of $50,000. Capital losses are limited to $3,000 per year---balance is carried over to subsequent years OR can be used to offset capital gains.

Q: Are there any real estate investments that don't invest in the high end markets?
I sold my ICF reit a few months ago which was good timing I had made over 100% return in the last few years. The real estate market is still good in Texas and many other moderately priced areas of the country. Its the Northeast, West Coast and other million dollar home markets that are the problem.

A: Well, you can go to the other end of the housing spectrum with ARC...they invest in homes and communities with mid/low end price ranges...mostly " modular" style... Look at: http://yahoo.com/q?s=ARC

Q: is your principle guaranteed if you buy a reit (real estate investment trust?


A: No. REIT is just a company that invests in real estate (operating REIT) or motrgages (mortgage REIT). The only way in which REITs are different from other companies is that REITs' profits are not taxed at the corporate level as long as they pay out at least 90% of their net income.

Q: Real Estate Investment Trust (REIT) Dividend and Yield question?
Okay..I am considering investing in 3 healthcare REITs. I looked on the market and found the following information on them... The three reits I am considering are Healthcare REIT (HCN), Universal Health Realty (UHT), and lastly, Healthcare Realty Trust (HR). I looked these details up on seekingalpha.com. for HR: 52wk high: 32.00 52wk low: 14.29 EPS: 0.58 PE: 34.00 Dividend: 1.54 Yield: 7.80 Market Cap: 1.27 b Exchange: NYE ------------------------------------------------ for HCN: 52wk high: 53.98 52wk low: 30.14 EPS: 3.17 PE: 11.50 Dividend: 2.72 Yield: 7.50 Market Cap: 4.05 b Exchange: NYE -------------------------------------------------- and lastly, for UHT: 52wk high: 39.30 52wk low: 20.98 EPS: 1.39 PE: 22.80 Dividend: 2.36 Yield: 7.40 Market Cap: 394.79 m Exchange: NYE ########################### Can someone please explain to me the following scenario: If I were to buy approx $6,089 of stock from each of those REITs, with the current yield and dividend payout--what would I be able to expect my quarterly dividends to be???

A: $6,089 X .078 = $474.94 Yearly interest $6,089 X .074 = $456.68 $6,089 X .075 = $450.59 total yearly interest = $1,382.21 quarterly interest = $345.55

Q: Real Estate Investment Trust - REIT?


A: As i guessed, you need an information about Real Estate Investment Trust. It is an investment vehicle that invests funds on behalf of its investors in real estate-related investments such as construction loans, mortgages, land and real estate company securities. Also search it on Wiki, Bizrates, etc.

Q: Are REIT mutual funds a good investment for the next year?


A: REITs have performed well in the past 5 years because the house prices have been rising. Statistics show that the rent income does not cover up for the mortgage plus the maintainance cost of a property. So, most of the returns have been through the rising cost of property (apprciation). Agreed that the house prices will not fall. But then they will not appriciate as much as they had done in past few years. So, the returns will not be very handsome. One plus point with REITs though is that, per law, they have to return most of their earnings as divident. So, they are one of the best if you are looking for a regular dividend earning.

Q: Are REIT mutual funds a good investment?


A: Many are good investments, but you need to make sure you pick a no-load, no transaction fee fund that has low management fees, and has a good history of returns.