I see your +7% and raise you my -30% :(
Sorry, no advice but sure felt good putting it into text in a reality check type of way.

If you are looking for income to live on over the long haul and don't plan on touching the principal then the short term ups and downs in share prices are meaningless to me. The share price on my bond fund has moved up and down these past 10 years but it has had no effect on my income.

I don't think it is accurate to compare the fluctuation in publicly traded REITs to non traded ones. As far as your example of rents in class A office space not being able to support a 6% dividend in non leveraged class A office space...when has that ever happened? My research shows never for the products I'm using. My REIT is currently 98% occupied and only needs 50% occupancy to cover the dividend. What are the odds of that happening and if occupancy rates reach those levels then my REIT will be the least of my concerns. But again, if my goal is a long term income then the short term fluctuations in the buildings value isn't a big deal. The value of class A office space over the long haul has gone up forever. I have no doubt in my mind those values (however slight) will be higher twenty years from now when I'm dead and the kids get the money. Granted I can't see the future but that is how it's worked the past 50+ years.

I also agree their is no free lunch. The trade off is I use CDs or treasuries but then my income would have been roughly 40% less then what I've been getting this past decade. Based on what my friends have been earning in the bank or in the stock market I wouldn't have changed a thing.

You're not going to do 7% without significant risk these days.

In a year or two, 7% might be easy if/when inflation really starts to take off. Anyone's guess.

The problem with market conditions like these is that hedging (the traditional method of reducing risk exposure) doesn't work very well - EVERYTHING is down, and down pretty significantly. Manufacturing, commodities, options, currencies, financials, energy, technology, etc. It's all in the tank. Index funds are lousy right now - best guess would be to find alternative energy start-ups, but even then, you're lucky to lose on 9 out of 10 of them; you just hope that the 100th one makes enough to offset the losses... Still very, very hard to "beat the street" in times like these.

It's even difficult to play the short/put side of things these days since a lot of the losses are priced into the markets at this point. I suppose if you're really ballsy you could write covered calls (or puts) and make some $$$, but that's also extremely risky. You can make a lot that way very quickly, but if the market moves against you, you can be underwater VERY fast, and there's no limit as to how far you can potentially lose (like say futures).

+1 on the REIT's..... NOW you're talkin!

I have been involved with some of these types of investments and they are excellent. As posted by 911Freak, they're not for the 'un-educated', simply because the average person won't understand them.

I have two of these right now; one pays a fixed rate of 8% and the other is a higher risk with no dividend, but when it plays out it will return very high%. My recommendation would be to research the company involved, if they have a proven track record of YEARS and YEARS with total transparency, their investment opportunities would be worth looking into.

We have them structured up here in Canada so that the profits can be earned tax free against a Capital Gains Excemption clause we have in place (its good for $3/4Million each person). There are alot of benefits and the companies that offer these usually have very sophisticated bean counters that set these things up very well.

Both of mine offer profit sharing with an impecable track record.
I'd say look into it.

+1 too.

I owned a company that did this for years; but when the market turned down and things got a little ugly it was way too tough to deal with the downside. (booting people outa houses) I couldn't do it and got out of that business.

Recently I started this up again, but loaning "Realtors" advances on their RE Commissions, unbelievable ROI's and a simple business to operate if you know what you're doing.

Probably not what you had in mind for momsie though?

Don't hold the fact that I work for citi smithbarney against me.....
The best bet is to look at 2 ideas. One is muni bonds, with insurance, high rated, depending on state of residence. NY has many issues tax free 4-5% yield right now giving taxable equivalent yield 7+% depending on tax bracket. The second is an annuity with 6% minimum. They do exist and can be an immediate annuity. Let me know if want any more info. Ken

What are your REITs doing with their income in excess of that used to pay the 6% dividend? Is it distributed to investors, such that the current dividend is far higher than 6%?

Yeah, if dividend is covered with 50% occupancy, somebody is making good bucks for managing the fund. Also, 50% occupancy paying 6% dividend implies a cap rate well over 10. I smell a rat, lukeh.

REITs are a good buy, if you wait for the commercial RE crash to work to the end. Then, you can grab at lower valuations and reasonable yields. As net values rise, you get an extra boost in return. If you have no intent of selling, you still cannot go wrong buying low.

Hookers and blow. You get the hookers, mom gets the blow. Everyone is happy.


Thank me later.

I would never own a second unless I was prepared to take out the first.

Also, many a REIT have been cutting and suspending dividends to survive, lately. And, I have personal memories of at least two periods in my life when owning almost anything in the commercial RE market was not good.

Higher yields come with commensurate risks; you just can't get around this law.

Good point John,
My REITs do exactly this; I could never get excited about investing in something that paid only a single digit dividend; I'm in it for the profit sharing portion that pays out to me tax free.

My investments only have one risk as far as I'm concerned, and that is "time", the real estate is held by the investment corp unincumbered, mortgage free. Then the development is increased in value by adding value. The only risk imo is the time factor; typically time will also add value, but a good REIT doesn't rely on that, also imo.

These are complicated investments, but for a developer like myself that understands the processes, they are no brainers! As long as the General Partner (managing development company) has the track record and proper credentials, I'd say THIS is the way to go in the investment world. LAND!