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Direct Property Investment vs REITs

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wayneL

wayneL

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Apologies if this has been discussed before, but I cannot find an appropriate thread.

We still have a fair bit in cash looking for a home... Pretty happy with precious metals and stock market investments as it stands at the moment, but have little exposure to real estate right now (just our own Ponderosa and a couple of small toe in the water REIT holdings).

In other threads people have detailed their own horror stories with dodgy tenants. Sure probably the majority I completely fine but one bad tenant can really put the kibosh on a whole strategy... At this stage of our lives just really do not want to have to possibly deal with that crap.

So.... We are looking at adding some REITs and not withstanding each has their own weaknesses and strength, bucking general it is seeming like a better option.

My question is, are we missing anything apart from what is obvious on face value. What are people's thoughts about this?
 
wayneL said:
Apologies if this has been discussed before, but I cannot find an appropriate thread.

We still have a fair bit in cash looking for a home... Pretty happy with precious metals and stock market investments as it stands at the moment, but have little exposure to real estate right now (just our own Ponderosa and a couple of small toe in the water REIT holdings).

In other threads people have detailed their own horror stories with dodgy tenants. Sure probably the majority I completely fine but one bad tenant can really put the kibosh on a whole strategy... At this stage of our lives just really do not want to have to possibly deal with that crap.

So.... We are looking at adding some REITs and not withstanding each has their own weaknesses and strength, bucking general it is seeming like a better option.

My question is, are we missing anything apart from what is obvious on face value. What are people's thoughts about this?
Click to expand...
if REITs , what niche ?

several are currently facing challenges , while some others might have some tailwinds coming

or you can try for a REIT ( or REITs ) that doesn't specialize and has a broad mix of assets/developments

and then you could ask East Coast or West Coast ( or all over, including internationally , since REITs rarely pay franking credits )

the devilish detail in REITs is gearing ( how much debt are they leveraging ) and that raises the interest rate bugbear

there is some chance property values will really plummet in the near future ( some sectors more than others )

the best part about REITs is you can only lose 100% of your investment capital ( unlike a destroyed property ) and your ongoing costs in REITs are fairly predictable ( unless you leverage them )

i hold several REITs but i love to 'cherry-pick niches ' and use them as bond substitutes , but it hasn't all been smooth sailing
 
divs4ever said:
if REITs , what niche ?

several are currently facing challenges , while some others might have some tailwinds coming

or you can try for a REIT ( or REITs ) that doesn't specialize and has a broad mix of assets/developments

and then you could ask East Coast or West Coast ( or all over, including internationally , since REITs rarely pay franking credits )

the devilish detail in REITs is gearing ( how much debt are they leveraging ) and that raises the interest rate bugbear

there is some chance property values will really plummet in the near future ( some sectors more than others )

the best part about REITs is you can only lose 100% of your investment capital ( unlike a destroyed property ) and your ongoing costs in REITs are fairly predictable ( unless you leverage them )

i hold several REITs but i love to 'cherry-pick niches ' and use them as bond substitutes , but it hasn't all been smooth sailing
Click to expand...
I guess one advantage of the REITs is being able to diversify with a relatively small amount of capital. Not only within the REIT itself but also you can diversify across those various niches you mentioned (if that's what you want to do).

Let's say if you pick 20k as a number, it would hardly get you the deposit on some dodgy s###hole with the only potential tenants being welfare bludgers or crack addicts, whereas 20k could also get you three or four or five positions across various sectors.

Then there's the fungibility angle.
 
wayneL said:
I guess one advantage of the REITs is being able to diversify with a relatively small amount of capital. Not only within the REIT itself but also you can diversify across those various niches you mentioned (if that's what you want to do).

Let's say if you pick 20k as a number, it would hardly get you the deposit on some dodgy s###hole with the only potential tenants being welfare bludgers or crack addicts, whereas 20k could also get you three or four or five positions across various sectors.

Then there's the fungibility angle.
Click to expand...
and liquidity angle you can exit a REIT rather quickly ( most of the time )

physical property can go very very right or terribly wrong ( say a compulsory acquisition and tangled up in court for years )
 
divs4ever said:
and liquidity angle you can exit a REIT rather quickly ( most of the time )

physical property can go very very right or terribly wrong ( say a compulsory acquisition and tangled up in court for years )
Click to expand...
I have own a reit not listed.. unit trust..not redeemable...
 
wayneL said:
So.... We are looking at adding some REITs and not withstanding each has their own weaknesses and strength, bucking general it is seeming like a better option.
Click to expand...

You may also wish to consider one of these. Look at the management cost of each to see if you're OK with that. I'm wary of any with performance fees.

DJRE has reduced its management fee to 0.2% from 1 July 2024.

1719616627988.png
International

1719616709313.png
 
Bellcose said:
You may also wish to consider one of these. Look at the management cost of each to see if you're OK with that. I'm wary of any with performance fees.

DJRE has reduced its management fee to 0.2% from 1 July 2024.

View attachment 179544
International

View attachment 179545
Click to expand...
i used to hold SLF ( and exited at a modest profit ) but it really wasn't doing what i wanted at the time and i already held the more desirable ( in my opinion ) REITs individually

will glance over REIT ( the ETF ) i don't remember checking that one out

but i still prefer to cherry-pick my REITs and grab the niche players when they are battered
 
The REITs (XPJ) are really starting to move, selection of stocks through chart analysis important but many are now moving forward with momentum and quite rapidly.

From Market Index -

“The list of best performing sectors wouldn’t be complete lately with mentioning the Real Estate Investment Trusts (XPJ) (+1.3%) sector. We’ve discussed many times in this Wrap how this long duration sector also tends to outperform during times of falling interest rates.”


Some that I’ve charted already on here include CHC, GPT, VCX.
I also am holding GMG, SGP, SCG, ARF.
All are making lovely progress to date.
It’s a sector that is already rumbling and continues to cut loose ….
 
Rosscoe62 said:
The REITs (XPJ) are really starting to move, selection of stocks through chart analysis important but many are now moving forward with momentum and quite rapidly.

From Market Index -

“The list of best performing sectors wouldn’t be complete lately with mentioning the Real Estate Investment Trusts (XPJ) (+1.3%) sector. We’ve discussed many times in this Wrap how this long duration sector also tends to outperform during times of falling interest rates.”


Some that I’ve charted already on here include CHC, GPT, VCX.
I also am holding GMG, SGP, SCG, ARF.
All are making lovely progress to date.
It’s a sector that is already rumbling and continues to cut loose ….
Click to expand...
I missed 2 of my reits buy orders today, hopefully a little drawback tomorrow to get in..
 
XPJ (REITs) - 6 month chart (roaring since early Sept) …

The US futures indices are looking very positive tonight, with our own futures index up again also. Early hours though … we’ll see how the next 21 hours pans out.

See what happens tmw with this sector. It did run very hard today so maybe a short respite?

1726737095616.png
 
Rosscoe62 said:
XPJ (REITs) - 6 month chart (roaring since early Sept) …

The US futures indices are looking very positive tonight, with our own futures index up again also. Early hours though … we’ll see how the next 21 hours pans out.

See what happens tmw with this sector. It did run very hard today so maybe a short respite?

View attachment 184479
Click to expand...
just carefully watch the gearing of the REITs , sure , some are busy deleveraging , but will they pay down existing debt or buy more ( hopefully better ) assets ?

some of these REITs will soon face particularly challenging times
 
Agree, when those challenging times arrive for some of them, my trailing stops will come into play and I’ll be farewelling those that hit the wall and reverse/descend in price.

The exit button will be pushed based on my trading plan and I say bye bye.
 
The IT sector and REITs continue to top the ASX sectors %’s over the last year.The Financials running in 3rd place. The Materials are now making their move.

1728161223080.png

The REITs have had a bit of breather and are consolidating, the 10yr bond yields have risen slightly and the REIT sector can be sensitive to these.

www.usbank.com

How Changing Interest Rates Affect Bonds | U.S. Bank

Bond yields and bond prices move in opposite directions, impacting the market value of other investments. Learn more about how interest rates and inflation affect bonds prices and bond yields.
www.usbank.com

The next meeting of the FOMC is November 6-7, 2024. To this point, investors fully expect another rate cut, but expectations of the size of that cut vary. As quoted in the above link …

Latest ASX Real Estate (XRE) chart demonstrating the consolidation period after a big run up in September.

1728160715646.png
 
The XRE (200 index) continues to hold 3rd spot on the ASX sectors list, with latest figures out shortly.
As Ducati and I have pointed out the 10 year treasury bonds have accelerated in a very short period of time, currently 4.27% (the REITs can be very sensitive to these). This will impact the REITs on a mid-long term basis should they continue to rise. Presently, they are the highest they have been since June. However the REITs are holding up relatively well.
It’s now a sector I’m watching very closely particularly with the upcoming US election.
The RSI (Relative Strength Index) keeps sliding …
The key level of support on the XRE chart is at the 3850 (currently 3930). If it breaks through this level of support, I’ll be cutting back on quite a few of these stocks currently held.
It’s now a waiting game with the big event in the US now only a matter of days away.
Pay careful attention to the 10 year treasury bonds yields chart ….



Year to date ->

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