For those who understand the unique advantages of REIT investing, the question of which REITs to own requires careful consideration. There are many ways to compare REITs that investors can use to populate their portfolios. One classic method uses the metrics that determine Economic Value Added (EVA), which expresses a REIT’s true economic profit. You can think of it as the value a company ... [Read More]
REITs and COVID-19
Very few industries have been left unscathed by the COVID-19 pandemic, and REITs are no exception. As you would imagine, the deep recession we find ourselves in has put a damper on demand within most real estate sectors, and prices have declined significantly in the first half of 2020. As of June 30, the FTSE Nareit All REITs Index showed a year-to-date total return of -15.01%. This has boosted ... [Read More]
Taxable REIT Subsidiaries
One of the major attractions of real estate investment trusts is that they pass-through income that sidesteps corporate double taxation. In order to qualify for tax benefits, REITs must comply with a set of asset and income tests. A taxable REIT subsidiary (TRS) is a corporation that gives REITs some compliance wiggle room, enabling REITs to compete with other real estate properties without ... [Read More]
Beta Explanation
Real estate is often called an “alternative” investment. That means it is an alternative to investments in stocks and bonds. Why is it good to have an alternative investment? The answer has to do with risk, reward, and a statistic called beta (β). In this article, we will define beta and explore why it is important to your investment strategy. We will also see how to look up and ... [Read More]
REITs vs Real Estate Options
This is the seventh in our series of articles of ways to invest in real estate. Real estate options come in two flavors: Over-the-counter (OTC) options to buy property and exchange-traded options on REITs and REIT exchange-traded funds. OTC Options OTC options are private contracts between a buyer and seller. They are quite different from exchange-traded futures. They are not regulated by ... [Read More]
REITs vs Real Estate Swaps
This is the eighth and last in our series of articles of ways to invest in real estate. Swap contracts come in a variety of types, including the total return swap, equity swap, contract for difference and credit default swap, among others. In this article, we’ll address the use of total return swaps to replicate the return one would earn on a REIT index ETF (exchange-traded fund). We choose ... [Read More]
REITs vs Real Estate Index Futures
This is the sixth in our series of articles of ways to invest in real estate. In the previous installment, we reviewed how real estate index funds match up against REITs. Real estate indexes form the basis for other types of financial instruments besides mutual funds and exchange-traded funds. In the next three articles, we’ll discuss how real estate indexes underlie three derivative contracts: ... [Read More]
REITs vs Real Estate Index Funds
This is the fifth article in our series of articles on The Nine Ways To Invest In Real Estate and it focuses on real estate index funds. In the previous article, we compared REITs with real estate funds of various kinds. In this article, we sharpen our focus to concentrate on real estate index funds. An index is a list of things; in this case, a list of REITs or other types of real estate ... [Read More]
REITs vs Real Estate Funds
This is the fourth article in our series about ways to invest in real estate. So far, we’ve contrasted REITs to direct ownership of property, crowdfunding, and mortgage-backed securities as ways to invest in real estate. Our next category is real estate funds, and they are remarkably similar to REITs. All are pass-through securities backed by a collection of real estate properties. However, ... [Read More]
REITs vs. Mortgage-Backed Securities
This is the fourth article in our series about ways to invest in real estate. In this article, we’ll compare mortgage-backed securities (MBS), also known as mortgage bonds, against REITs, specifically mortgage REITs (mREITs). MREITs differ from equity REITs in that they own real estate debt (mortgages and MBS) rather than real estate. Both mREITs and MBS provide cash flows consisting of ... [Read More]