REITs Are In Trouble, Here's Why ...

REITs Are In Trouble, Here's Why ...



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Hey guys, welcome to the channel I'm a full time Chartered Accountant as well as a part time Real Estate agent with a background in finance, investing, budgeting and of course, real estate.

I've been on a personal mission for the last 10 years to build multiple streams of income, including both passive and active income. On this journey, I've gained a ton of domain knowledge about personal finance and investments that I would love to share.

My goal for this channel is to help you understand basic taxes, personal finance, investing, budgeting and expense management.

[claude]

REIT vs Bond is not simply comparing gross yields. You must also take into account the different tax treatment — dividend vs interest.

[davidreichert]

Yield is not what needs to exceed the risk free rate, it is total return that needs to exceed the risk free rate. So in addition to yield, there is also growth to consider. So even if a REIT is yielding 2%, if growth is 1.5% or better then the total return exceeds the RFF. Focusing solely on yield leads to bad decisions.

[brenx__x]

Hi Bassem. I found you channel last week and have watched at least 20 of your videos. I thought you might be interested to know that this was the first video that caught my attention.

I was interested in exploring REITS as an investment and understand that they are taxed differently; I wanted to gain a better understanding of how they would affect my tax obligation.

Based on the knowledge that you have provided, and the rationale as to why it can be weak investment in this economic climate, I am no longer interested in investing in them.

The scope of your channel is amazing. It really speaks to my interests and I hope you keep pumping out content.

[owaisaa]

At the same time amazing time to accumulate reits and wait for interest rate to be normal. I think Capreit is rock solid, anything below $35 is absolute gift imo given the exposure and quality of properties you are getting with this.

[rhythmandacoustics]

So as long as they have lower than let's say 70% pay out ratio, they will be fine for a few years but if higher their prices will crash real bad due to higher interest rates. Can you give a more specific video on how does the REIT credit system work? What type of credit etc.

[jun]

Hi. Bassem. Good point. And I was interested in Smart REIT, but I saw they diluted shares(units). Do you consider outstanding share units when you buy REITs?

[Lexis.options]

Great Post Bassem, been following you for a while.

[irishboy]

As a newcomer with long-term goals, I'm very much enticed and scared by REITs right now

[Glencairns]

Turns out you have to spend money to maintain those buildings... it cuts into the profit margins, hence all those boarded up rental houses on the westside of Saskatoon.

[sidb]

There goes my 2 investments in REITs then! :P

Bassem, Could you please review options premiums for companies that split their shares? Amazon did a split last week and their premiums are extremly crappy! Will the same occur with TSLA?

[alanp]

Pretty basic analysis here, what’s your not accounting for is the increasing cap rates for any acquisitions made with the higher rate debt. Refinancing of current debt is an issue but one can screen REITs for upcoming bond maturities to account for this. In general, cap rate spreads increase in proportion to interest rates. In addition, apartment rents have been rising at a much higher rate than inflation or interest rates.

REITs have not been this cheap in years and have, for the most part, the cleanest balance sheets they have had in decades.

[LudwigRomero]

Ask me how fast i clicked on this video when i knew you were talking about REITs.

[GnarkillAIC]

Good time to buy reits right now then.. ic alot of them are low..

[mckessa]

Most REITs have been going down steadily for awhile. Would like to buy when they bottom out, whenever that is.

[Slickpete]

*but remember you can compound and drip REITS, but u can't compound bonds, right*

[mikei]

I really wanted to buy CAPREIT but even at today's price ($44.16), the yield is only 3.11%. I've been watching it fall from $62 since July 2021. I may buy when it hits the pandemic low ($37).

[erwinbourne]

Very informative as usual. Thank you very much

[OMGWTFLOLSMH]

You were not wrong. All my REITs have sunk, one has slashed distributions by 60% and another by 100%. Yep, one has stopped payouts. I'm probably going to have to kiss that bastard goodbye, I doubt they will recover.

[jmcg]

Commercial rents are almost always in multi year fixed rents. On renewal these rents could fall with the recession. Vacancy will rise. Tenant defaults will increase. Operating costs will increase with inflation. Perfect storm for REITS to crash. REITS may have to call cash to cover cash flow.

[guardian_ttv]

lol. Bonds have been the most risky investment during this period. What you failed to mention is when bond yields go up the bond price goes down. bond yields have been increasing at historic rates which in turn means with this volatility you buy a bond today the yield goes up tomorrow but you've lost money on the bond. Bonds were only considered safe because the yields stay steady therefore so does the price and you protect your wealth.