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Old 10-01-2011, 02:07 PM
 
11 posts, read 20,595 times
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Thank you kettle!! I am going to look a little deeper into that option. I hadn't heard of the terrible Ts! I got a good laugh out of that! Are you currently invested in any REITs and if so, how have they done for you? How long have you had them and have you noticed any patterns in their earnings? Generally, what kind of earnings can you expect over a 15-25 year period? Percentage? I know I could probably read a hundred books on this (and I will probably read a few), but I like to get people's personal experiences and opinions (as many as I can) and formulate my own ideas. Thanks for responding!
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Old 10-02-2011, 01:24 AM
 
Location: Tijuana Exurbs
3,866 posts, read 10,108,159 times
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I have invested in one pure real estate REIT over the years. It purchases stores from national and regional chains and then leases them back to the retailer. It pays a steady, slightly increasing monthly dividend. I invested during a period of panic and got in at a low price when the yield was slightly above 7%. Fear that one of its lessees was going under and they would lose a major renter had driven the price down. However, this REIT only buys the buildings housing the most profitable branches of its clients which are the ones mostly likely to continue operating after a bankruptcy proceeding and reorganization.

With price appreciation of 50%, and some small dividend increases, the yield is now at about 5% which is more typical of the return you will find from REITs (4% - 6%). 7% was very unusual. You could just reinvest your dividends, and 10 to 20 years from now, have a very nice return from compounding and the modest dividend increases. Those modest dividend increases are what set REITs apart from bonds which have an interest payment that is constantly being eroded by inflation.

REITs with long term leases offer the protection of continuity of tenancy, but are at risk from sudden spikes of inflation. Over time, they can adjust their rents upwards, and they do gain some benefit from asset inflation, but inflation impairs the value of the income stream they produce.
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