# REIT Recommendations?



## saad1253 (Sep 11, 2011)

Hi I am planning on investing $1200 (about 10% of my RRSP) in REIT. Different options I am looking at:

First Asset REIT Income A, XRE, ZRE, REI.UN (lack of diversification)


A few options I am considering. REI.UN + ZRE (50% each)

or First Asset REIT Income A (2.5 MER but it has been outperforming)

or just XRE

Thanks for the response.

So


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## Dopplegangerr (Sep 3, 2011)

I think all into REI.UN is a pretty safe bet, especially for only 1200. They are pretty dominant in Canada but also have exposure to the USA. Good PE and Dividend and a nice low Beta. For sure a company that has been on my watch list for the a while to hold as a permanent position. Just need to find the right entree point


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## Cal (Jun 17, 2009)

As you don't seem to have the greatest grasp on all of this invsting stuff at this point. I would do your second choice, REI.UN and ZRE. 50/50.

REI.UN is a solid choice, and ZRE will allow you some diversification and allow you to track other REIT holdings that it has to gain some familiarity with those holdings.

I am assuming that this fits into your overall asset allocation and your investing goals.


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## fatcat (Nov 11, 2009)

i hold both rei and xre and xre has done much better than rei
i don't much like paying the .55 mer when rei has 0.0 mer
at the end of the year i am going to switch into rei and car to get commercial and residential rental exposure


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## saad1253 (Sep 11, 2011)

Cal said:


> *As you don't seem to have the greatest grasp on all of this invsting stuff at this point*. I would do your second choice, REI.UN and ZRE. 50/50.
> 
> REI.UN is a solid choice, and ZRE will allow you some diversification and allow you to track other REIT holdings that it has to gain some familiarity with those holdings.
> 
> I am assuming that this fits into your overall asset allocation and your investing goals.


Thanks for the help, however, was that line necessary? Just cause I am asking for an opinion doesn't mean I am "new to this investing stuff" I have been building an RRSP portfolio and I have all the sectors worked out apart from REITS.


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## Jon_Snow (May 20, 2009)

XRE has been an absolute rockstar for my portfolio. I couldn't recommend it enough.


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## Cal (Jun 17, 2009)

Sorry, no offense intended. From the original post it just seemed that you were still trying to work things out in regards to your RRSP. You didn't provide any other information regarding any asset allocation to go on.

All the best with your investment.


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## saad1253 (Sep 11, 2011)

Not a problem. I typed it up in a rush. As I wanted to get some ideas for tomorrow. Thanks for the suggestion tho


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## saad1253 (Sep 11, 2011)

Any thoughts on the first asset reit income mutual fund? It has been out performing and gives access to US reits 
by about 3-4 percent...taking $9.95 commission on xre and rio can into account as well


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## doctrine (Sep 30, 2011)

Seems like 10% is a good amount. Remember though REITs can drop like rocks just like any other asset class...


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## saad1253 (Sep 11, 2011)

Agreed doctrine. That is why I am capping the allocation to 10%.


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## saad1253 (Sep 11, 2011)

I have narrowed it down to REI.UN and the First Asset REIT Income Fund. The MER including the commissions and taxes works out to around 3.64% (I am allocating 0.83% to REI.UN because of the $9.95 fee) meaning it has to outperform REI.UN annually by around 2.81%,which it has so far. Hmmm decisions decisions. I know its a small amount though.. Final Thoughts?


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## saad1253 (Sep 11, 2011)

80% was Return of Capital in 2011 for the fund... and the returns take into account the distributions being reinvested.


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## londoncalling (Sep 17, 2011)

With purchasing REI.UN that 9.95 is a one time expense. With first asset it is for as long as you own the fund. Since the amount invested would be considered minimal ( I myself try to keep my commissions as low as possible) I would consider an expense of 2.81% to be quite high. I love REI but have been holding off purchasing more for quite some time. I am currently overweight REITs because of their performance as of late. This is not a bad thing but it is preventing me from adding to the sector. I personally think REI is overpriced but I have thought that for some time and it continues to perform well. I prefer to buy the individual holdings thus creating an MER free holding after initial cost of purchase but clearly you are a little light on cash to do the same for the time being. If it were up to me I would buy one or the other. I know you are considering diversification but won't that be found with the mutual? I would also consider looking at REIT ETFs which may have the same or similar holdings with a lower MER.


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## saad1253 (Sep 11, 2011)

Thanks for the input londoncalling. I gave it a thought and decided against the Mutualfund the 2.81 mer to get 80% ROC (even if its for the time being) does not make much sense. Thought about REI.UN and its price pretty close to 52 week high, so ended up buying some shares of XRE I thought about the 9.95 and the 0.55 but I am buying REI and REF and a few more for 0.55 mer, so why not.


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## Belguy (May 24, 2010)

If you believe that we are entering an era of deflation, avoid investing in real estate. Property values drop because demand will fall and so will prices. Renting becomes an attractive option.

--Les Whittington, Toronto Star, July 30


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## Cal (Jun 17, 2009)

^ that doesn't really apply to a REIT in the same way that it could to residential RE. They are alreadying renting the space out. Hence the income. Having siad that, when the BOC raises rates this may very well hinder some REit profits, amongst other sectors.


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## Mall Guy (Sep 14, 2011)

Belguy said:


> If you believe that we are entering an era of deflation, avoid investing in real estate. Property values drop because demand will fall and so will prices. Renting becomes an attractive option.


Does that mean you are looking at residential REITs - Boardwalk, CAPReit, Northern, Killam for example ?

OP - why so enthralled with First Asset REIT Income Fund - not sure what I'm missing on that one ?


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## Belguy (May 24, 2010)

I am a simple buy and hold forever man and so I just hold XRE according to my target asset allocation and only trade for rebalancing purposes. It's not for everybody.


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## Murph (Sep 9, 2009)

I would be careful investing in canadian reits right now, distributions could take a hit if the RE market in canada takes a dump as many are predicting, instead look at U.S reits such a VNQ and MORT.


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## slacker (Mar 8, 2010)

@Murphy: Why would that be?


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## saad1253 (Sep 11, 2011)

Mall Guy said:


> Does that mean you are looking at residential REITs - Boardwalk, CAPReit, Northern, Killam for example ?
> 
> OP - why so enthralled with First Asset REIT Income Fund - not sure what I'm missing on that one ?


I liked First Asset initially because of the outperformance. But once I learned it is mostly Return of Capital, I quickly lost interest.


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## Murph (Sep 9, 2009)

slacker said:


> @Murphy: Why would that be?


Some reits have significant residential exposure and any dowturn would put your capital at risk, not to mention the units dividend payout. Just pull up a five year chart for U.S Reits and compare to the S&P 500, declines were much more pronounced during the housing bust of 07-08...


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## Spidey (May 11, 2009)

Morguard has a new REIT that's worth a look - MRG.UN. This one is buying residential properties in the US which seems like good timing given the state of the US RE market. Recommended by Dennis Mitchel and John O'Connell.


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## slacker (Mar 8, 2010)

Murph said:


> Some reits have significant residential exposure and any dowturn would put your capital at risk, not to mention the units dividend payout. Just pull up a five year chart for U.S Reits and compare to the S&P 500, declines were much more pronounced during the housing bust of 07-08...


Yes, I'm looking at the 5 year chart for VNQ vs XRE, and they both suffered similar drop in capital in 2008. In fact the offered basic the same amount of capital return.

https://www.google.com/finance?chdn...cmpto=TSE:XRE&cmptdms=0&q=NYSEARCA:VNQ&ntsp=0


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## kcowan (Jul 1, 2010)

Spidey said:


> Morguard has a new REIT that's worth a look - MRG.UN. This one is buying residential properties in the US which seems like good timing given the state of the US RE market. Recommended by Dennis Mitchel and John O'Connell.


Are you convinced that US real estate is at a bottom? What about all the inventory that is pending foreclosure and not yet listed?


> CNBC’s Diana Olick breaks down the latest Case/Shiller data, showing home prices are way down, and not expected to get better anytime soon.


Link








Graph


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## Spidey (May 11, 2009)

kcowan said:


> Are you convinced that US real estate is at a bottom? What about all the inventory that is pending foreclosure and not yet listed?


You can never be convinced that an asset has hit bottom. However, we do know that US RE is significantly cheaper than it has been for a very long time. And there appears to be a discrepancy towards what one can receive in rent versus what places are selling for. Posters such as Rickson (who has disappeared from this and FWR) have been taking advantage of this by purchasing distressed rental properties in the US and reaping fairly respectable income. So I've been looking for a REIT investment that might mimic (as best as possible within the constraints of a REIT) what he has been doing. Morguard also has a long and respected history in real estate investments and are better able to find value than I might. They also are not entirely US focused and have several properties in Canada. However, my sense is that they will be scouting the US market for further opportunities. 

That all being said, I certainly wouldn't bet the farm on this one. But for a little bit of US diversification in the residential REIT space, it might be worth a look.

Oh, I almost forgot. There is significant ownership by insiders.


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## CanadianCapitalist (Mar 31, 2009)

Spidey said:


> So I've been looking for a REIT investment that might mimic (as best as possible within the constraints of a REIT) what he has been doing. Morguard also has a long and respected history in real estate investments and are better able to find value than I might.


I would be interested if you found any other investment vehicle to take advantage of distressed US residential real estate. Morguard is interesting but the bulk of their holdings are in Canada.


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## Spidey (May 11, 2009)

CanadianCapitalist said:


> I would be interested if you found any other investment vehicle to take advantage of distressed US residential real estate. Morguard is interesting but the bulk of their holdings are in Canada.


No I haven't, which is why I find this one attractive. I haven't explored US based residential REITs to any great extent but I remember taking a cursory look over a year back when Rickson was posting about his success and didn't see any that interested me. Most of the holdings of MRG.UN are currently in Canada but my sense from listening to analysts is that they are currently buying and shopping for US properties. This may even mean that they will benefit if US properties have further to decline. (However my sense, for what it's worth, is that the US real estate market has pretty well bottomed.) It is a newer REIT that has just recently become established, so one has to go a little on the reputation of Morguard and the analysts who recommend it.


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## HaroldCrump (Jun 10, 2009)

CanadianCapitalist said:


> I would be interested if you found any other investment vehicle to take advantage of distressed US residential real estate. Morguard is interesting but the bulk of their holdings are in Canada.


A new small-cap REIT has launched recently on the TSX.V exchange called Pure Multi-Family REIT (RUF.U).
They are focused exclusively on the US residential building sector.
Currently, they have a small portfolio of apartment buildings and multi-family buildings in the the Dallas, TX area.
However, they have expansion plans both within that area as well as other parts of the US.

RUF trades on the TSX-V exchange, but pl. note that it trades in USD and the distributions are in USD as well.


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## Murph (Sep 9, 2009)

slacker said:


> Yes, I'm looking at the 5 year chart for VNQ vs XRE, and they both suffered similar drop in capital in 2008. In fact the offered basic the same amount of capital return.
> 
> https://www.google.com/finance?chdn...cmpto=TSE:XRE&cmptdms=0&q=NYSEARCA:VNQ&ntsp=0


Both suffered similar drops but a lot steeper than the S&P, in the case of VNQ it declined about 70% vs about 50% for the S&P. Wish I had bought some back in March of 09


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## Financial Cents (Jul 22, 2010)

REI.UN, HR.UN and REF.UN are good options. Buy and hold and forget the MERs.


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## fersure (Apr 19, 2009)

HaroldCrump said:


> A new small-cap REIT has launched recently on the TSX.V exchange called Pure Multi-Family REIT (RUF.U).
> They are focused exclusively on the US residential building sector.
> l.


RUF.U seems to be run by the same guys who built Pure Industrial Reit (AAR.UN). They've done a really good job in that niche market...earning themselves a move from the Venture to the TSX.


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## HaroldCrump (Jun 10, 2009)

Yes, it is the same set of guys/girl, along with one other partner I believe.
And AAR still trades on the V exchange, hasn't moved to TSX yet.


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## kyboch (Dec 23, 2011)

I have 40,000 in ZRE. The MER is .55. That translates to 220 bucks per year. I think that is an unbelievably good deal to own an equal amount of 18 REITS. It's paying 5.21% dividend. I don't really get why you would want to own just 3 REITS when you can be diversified across 18 of them for a tiny amount of money. I mean I get not wanting to pay the MER but to me it's really great value.


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## zylon (Oct 27, 2010)

I'm pretty happy with the four I own.

Depending on the time period used for comparison, mileage will vary.

I went back as close as I could to inception date of ZRE.


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## Mall Guy (Sep 14, 2011)

kyboch said:


> I have 40,000 in ZRE. The MER is .55. That translates to 220 bucks per year. I think that is an unbelievably good deal to own an equal amount of 18 REITS. It's paying 5.21% dividend. I don't really get why you would want to own just 3 REITS when you can be diversified across 18 of them for a tiny amount of money. I mean I get not wanting to pay the MER but to me it's really great value.


But doesn't the fact that they are an "Equal Weight REIT Index" mean that when they re-balance they would be selling some REI.UN (52 week high) and buying more INN.UN? (sell high buy low . . . "what else does the box say" perhaps I should shut up now . . .) Not saying that's good (or bad), but I think I would like to make that decision for myself. The 5.21% is lower than the yield on my basket of REITs, and CDN banks, but that's a product of entry point. Can't argue ZRE has solid REIT names (INN.UN ???) but 19 trades at $9.95 is one time vs $220/year.


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## londoncalling (Sep 17, 2011)

deleted due to redundancy


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## kyboch (Dec 23, 2011)

zylon said:


> I'm pretty happy with the four I own.
> 
> Depending on the time period used for comparison, mileage will vary.
> 
> I went back as close as I could to inception date of ZRE.



Woah! I see your point zylon. I mean I like ZRE... but if I picked up 5-6 REITS individually I would save the MER but I would also be spending more on trades and re-balancing would be more trades too as well as being less diversified. mmmmm Am I the only one that struggles with owning an ETF vs owning the individual stocks? I'm like this with my dividend stocks too. I own CDZ and ZDV but think sometimes that I should own some individual stocks.


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## mrPPincer (Nov 21, 2011)

I don't think rebalancing has to be more trades at all. If you're adding to your reit allocation you can just buy the lowest one at the moment or a new reit; if you need to take some out, just take from the highest one, but if your're still in the wealth-building stage you shouldn't really have to.

It's tough enough finding a positive return these days without giving away an extra half a percent every year to MERs on top of the hidden costs incurred in an ETF that has to rebalance a lot IMO, so no, I don't struggle with that anymore, I always look at the MERs first now.


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## zylon (Oct 27, 2010)

*mrPPincer:* +1 :encouragement:

*kyboch:* everyone has different circumstances; if you trade a lot, then ETF makes sense.
I recently sold 1/2 of one REIT, and that's likely all I'll do for the rest of the year in this sector.


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## Financial Cents (Jul 22, 2010)

@zylon, great chart.

@kyboch, I hear ya, re: struggle with ETFs and dividend paying stocks. I struggle with this now and again. I think, if you can hold a diversified bunch of dividend stocks, and not trade them, they win over ETFs, especially REITs where you can own REI.UN as a proxy for XRE performance. 

http://www.myownadvisor.ca/2012/07/reader-question-why-dont-you-just-buy-dividend-etfs/


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## kyboch (Dec 23, 2011)

Financial Cents said:


> @zylon, great chart.
> 
> @kyboch, I hear ya, re: struggle with ETFs and dividend paying stocks. I struggle with this now and again. I think, if you can hold a diversified bunch of dividend stocks, and not trade them, they win over ETFs, especially REITs where you can own REI.UN as a proxy for XRE performance.
> 
> http://www.myownadvisor.ca/2012/07/reader-question-why-dont-you-just-buy-dividend-etfs/


Wow, that's a great article! I have actually read it before as I read your blog regularly and have learned a ton from it. I guess right now I still feel better about owning the ETFs. That's probably because I am a little unsure which stocks to pick. I am doing what you are doing too, I have 15% of my portfolio in dividend ETFs CDZ and ZDV and 10% in ZRE, XIC 15% and VUS 20%, the rest is in bond ETFs XBB 20%, XRB 10%, and CHB 10%. So most is indexed although just in north america no europe for now..

I have a pretty big chunk of money, the dividend portion of 15% is 60,000. Look I know that you are very experienced in dividend investing but I also know that I pull the trigger on my own investments. But, how many stocks do you think I should own with that 60g? I am thinking 10 or so. Here is what I have come up with:
Dividend Stocks
FTS-ALA-IPL.UN-BCE-CM-BNS-BMO -EIF-CHE.UN-CPG, 2 natural gas, 1 pipeline, 1 telecom, 3 banks, 1 aviation company, 1 sulpher company and 1 oil&gas.
REITS
AX.UN-D.UN-CSH.UN-CUF.UN-CWT.UN-REI.UN

I am a buy hold and rebalance type of guy and I think that these stocks should be the hold forever types. Many of these stocks are at or near 52 week highs though, so there's the timing to consider also. I'd love your opinion on this.


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## Belguy (May 24, 2010)

Beware XRE!!

http://www.theglobeandmail.com/glob...a-the-risky-new-world-of-etfs/article4475868/

http://www.theglobeandmail.com/glob...ith-property-portfolios-value/article4474140/


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## andrewf (Mar 1, 2010)

kyboch said:


> Am I the only one that struggles with owning an ETF vs owning the individual stocks?


Canadian REIT ETFs are somewhat anomalous. There are not many ETFs that only hold 15 or so companies. Most ETFs, at least the passive variety, hold hundreds or thousands of securities. I think the main reason why people struggle with owning the components vs. owning the REIT is that the MER is so high on XRE/ZRE. Hopefully Vanguard will get off its *** and put these two funds to bed with a nice <20 bps MER REIT ETF.


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