REIT

[ed1964]

anyone invest in these. I was looking at GOV, they are a REIT that pays a good dividend. I was wondering if anyone has any input on them.

Thanks

[College Stash]

VNQ is an awesome REIT Index fund, most would say it's the best in the industry. I invest in it and I think it's a great long-term hold. If you want Reits as a small part of your portfolio, I recommend holding it in a tax-deffered or Roth account. All Reit distributions are taxed as ordinary so if it's in a brokerage account it's probably not the best. I've funded my Roth IRA the last few years with VNQ.

But to your question, I would invest in a REIT index over an individual REIT for stability. You never know when an Enron event can happen.

[mrshudson]

Yep, nearly all REIT dividends are treated unqualified for tax purposes, and you wind up paying ordinary income tax on it.

[forummm]

If you do hold it in taxable, the return of capital distributions are not taxed. They actually reduce your basis in the original shares. Just another weird complication to avoid by leaving it in a tax-advantaged account as recommended.

Keep in mind that there are already REITs in any 500 index fund or total stock market index fund as well.

[Roots&Wings]

VGSLX is ~5% of my stash held in Roth IRA.

[ed1964]

Thanks for all reply's! Think I will stick to index funds.

[mrpercentage]

The REIT of all REIT's is O
but that is just IMHO
two awesome traits about O
1. monthly dividends
2. performance history

[College Stash]

The REIT of all REIT's is O
but that is just IMHO
two awesome traits about O
1. monthly dividends
2. performance history

Some really good performance on that REIT. I just looked at the 10 year track record on Morningstar. Has it been that consistent with dividends for even longer?

[Bearded Man]

Following.

[thedayisbrave]

VNQ is an awesome REIT Index fund, most would say it's the best in the industry. I invest in it and I think it's a great long-term hold. If you want Reits as a small part of your portfolio, I recommend holding it in a tax-deffered or Roth account. All Reit distributions are taxed as ordinary so if it's in a brokerage account it's probably not the best. I've funded my Roth IRA the last few years with VNQ.

But to your question, I would invest in a REIT index over an individual REIT for stability. You never know when an Enron event can happen.

+1

[Tremeroy]

If you do hold it in taxable, the return of capital distributions are not taxed. They actually reduce your basis in the original shares.

This is an important point & is a part of why I think that individual REITs are best held in taxable accounts. REITs generally throw off enough depreciation to shield the much of the REIT's distributions from taxation. Assuming that the REIT does make "return of capital" distributions, you may end up with a tax basis of 0, which means that you would pay capital gains tax on 100% of the sale price whenever you divest of the shares.

The other reason that I think individual REITs should be held in taxable accounts is the rule on Unrelated Business Taxable Income. If a REIT generates more than a certain threshold of gross income in a given year (maybe $1,000?), then you will actually have to pay current-year income tax, regardless of the REIT being held in a tax-advantaged account.

Investing in a REIT index eliminates both of the rationale I cite above. It is the simplest, most diversified approach. If you are interested in the overall asset class & not a certain group of asset / real estate managers, I think it is really the best way to go.

[FI40]

Keep in mind that there are already REITs in any 500 index fund or total stock market index fund as well.

+1. Think long and hard about why this asset class needs to be overweighted in your portfolio (assuming you believe in market cap weighting of the entire publicly traded market). I used to hold VNQ, but when taking a hard look at my Investment Policy Statement a year or two ago I decided I couldn't justify it. I think I was "chasing yield" when I bought it initially. Jim Collins made the same decision a while ago I believe.

That's not to say it's a bad thing to own, just that from an indexing purist's perspective there's no room for it.

[mrpercentage]

The REIT of all REIT's is O
but that is just IMHO
two awesome traits about O
1. monthly dividends
2. performance history

Some really good performance on that REIT. I just looked at the 10 year track record on Morningstar. Has it been that consistent with dividends for even longer?

Yes 20 years