The Dangers of REIT Investing: 5 MUST KNOWS Before Buying Real Estate Investment Trusts!

Not all my REIT investments are successful! A good example is my investment in Medical Properties Trust (MPW), which has performed very poorly in recent years due to tenant difficulties. This REIT has cost me over 70%. In short, I underestimated the leverage of the REIT because I underappreciated the risk of its cash flow. However investors commonly also make other mistakes when investing in REITs. Just to name a few: they fail to identify conflicts of interest, they pay too much attention to the dividend yield, and they ignore foreign REITs.

Image sources: O, MPW, NAREIT, YCHARTS, EPRA, Canva Important

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#reits #dividend #passiveincome

Disclaimer: Leonberg Capital and I personally invest in EPRT. This video is impersonal and does not provide individualized advice or recommendations for any specific person. Viewers/readers should not make any investment decision without conducting their own due diligence and consulting their financial advisor about their specific situation. This video is for entertainment purposes only and you are responsible for your own investment decisions. The information is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The opinions expressed are those of the publisher and are subject to change without notice. This YouTube channel is managed by Leonberg Research OÜ, a subsidiary of Leonberg Capital OÜ.#reits #dividend #passiveincome

[askjussi]

Any other mistakes that I missed? Let me know in the comment section. Thanks for all your support! All your "likes" are making a big difference and I appreciate it. Jussi

[keithss]

I’m down about 60% on mpw. But I bought some more at 2.97 last week and just yesterday got sone more at 3.15. Brought my cost basis down from 9.30 to 6.80. I may nibble a bit more to get my cost basis under 6.00 and wait to see what happens over the next 12 months or so

[tomasvaclavicek]

Very good tips, Jussi! It would be interesting to see some video of yours focused on the last two tips - smaller REITs and international REITs

[skullrose]

One happy tip is to never sell when it goes down. Reinvest the dividends and buy more when it goes down because I had an unrealized loss of a hundred dollars on Realty Income before it rebounded putting me at a near $300 gain. I DCA'd while it was going down. It's up, and I'm mad at that. I hate rising stock costs as I'm in the buying phase of the cycle of my investing journey.

[davidwysocki]

A fabulous cautionary and informative video presentation on investing in REITs. Good stuff, Jussi!

[dominikfrohlich]

MPW taught me stay away from healthcare and single stocks. I will buy REITS only using ETFs or CEFs and let fund managers do the selection for me. Only exceptions are the absolute best REITs which are usually priced at high multiples so less opportunities to get a deal.

[delfina]

Thank you very much for sharing your knowledge! Could you suggest any European REITS?

[toromontana]

My REIT strategy is simple. Make a list of everything your broker(s) offer(s). Buy everything that doesn't look like obvious crap. Hold.

I'm not asking much. Real estate typically grows with inflation and pays rent. So if shareholder equity (adjusted to share dilution) is volatile / doesn't keep up with inflation over long periods of time, that's probably a shitty REIT. Same if the dividend is low. My home can make 4-5% rent. If a REIT only pays 1-2% and barely keeps up with inflation, that's bad. (1-2% is good only if there's explosive growth and the dividend grows too.)

[mattm]

Dividends are money that is NOT being reinvested in the company. This is why dividends and capital gains are often inversely related.

[jen-k-]

Thank you, as usual, for the video! Tomorrow is the last day of my free trial at HYL and I have really loved that too! 😊

[sagig]

Very good video Jussi. I made the mistake with MPW. At this point, I'm hoping for the best with this stock. I won't sell it, but not sure that I expect it to recover. I don't know. I did learn from this 'yield chasing' like you said ... Can you please do a video on international REITs? perhaps mention 3-5 REITs to consider that aren't in the USA? Thanks!

[Thedividendprojectt]

I judge REITs by the number of years they grew their dividend and the dividend growth rate. Is this a good general rule of thumb for a conservative investor? I understand some bad companies may slip through the cracks and get into my portfolio but I try to invest like an ETF would with rules.

I’m still trying to understand the payout ratios for REITs since it’s different than stocks. I’ve been told not to use the payout ratio but use FFO

Great video none the less!

[shaneomack]

Mpw has been disintegrating for 2 years.. I’m blown away people are still invested in this 🚮 of a company.

[robertdagge]

Very good thanks.

The problem with small reits is that they are unable to grow to any extent without significant cash input - which usually means dilution. There is one reit I have been looking at in the UK but it is only GBP245m in assets - my fear is either it won't grow or conversely will raise heavily to grow.

Most of my reits are in tax-free Singapore - some good, some not so good. China exposure is slaughtering many reits there.

[zenastronomy]

reits are dangerous when interest rates are rising

[birdman]

Are you sure about your data? The video says the NASDAQ had a lower return than the S&P 500 over the 20 years in your chart. I just pulled up the data on the NASDAQ and the S&P 500 and it shows the NASDAQ outperformed the S&P 500 during your 20 year timeframe and has outperformed it even more from 2020 to 2024. Am I wrong? Thanks in advance.

[zenastronomy]

how do you invest in 3rd world reits? no broker offers them

[Imran-Shah]

I am wondering, which reits are solid for the future to invest in for passive income? Clearly WHLR is not for example. Any advice on this? Another thing: You have to be careful with foreign stocks (like REITS) due to taxation rules. A lot of countries already withhold dividend taxes whereas in the US you receive dividend and then you need to declare it on your tax return. Except if you are investing in a ROTH. But then investing in foreign stocks is a pain because you need to go through all sorts of loopholes and paperwork to get the full dividend. It's not worth the pain.

[ArthurDentZaphodBeeb]

REITs only outperformed because last 40 years we saw a historic decrease in interest rates. That will never happen again in out lifetimes. REITs will underperform going forward.

[sagig]

Hi Jussi. Thanks again (as always) for addressing my previous comment/suggestion. Here is another suggestion, I think it'll help if you make a video on this: I have recently bought few REITs. I'm considering upsizing my REIT position (perhaps new REITs), however, I'm debating whether to buy a 20yr T-Bond yielding 4.5% for 20 yrs. I realize there's no right/wrong here and lots of variable, risk tolerance, and other personal preferences involved, but would love to hear your thoughts why going into "good REITs" is a better option at this point than locking a 4.5% yield on a 20-yr TBond. Is that a "fair question/suggestion" ? Like said, I have quite a good REIT exposure already, not asking this as advice, just as your point of view.