Why Real Estate is a Good Investment
It isn’t unusual for brokers and investment advisers to steer clear of real estate. Some won’t recommend individual real estate stocks. They might be more inclined to recommend an ETF like VNQ, IYR, SCHH, or FREL. There are two downsides to this approach. One is that the dividend yield is diluted by some less-than-desirable real estate investments. The second is that you have to pay an expense ratio. In my opinion, it is better to buy a couple good REITs.
I think real estate is an excellent investment. There are very few small-cap, mid-cap, or large-cap businesses that don’t require real estate. They need retail space, or large buildings. These great companies usually don’t want to own their real estate because there are advantages to leasing land and buildings.
Top Three REITS By Dollars
If you asked me what my top three real estate investments are, the answer is easy: O, MPW, and STAG. Each of these is in a different sector, and none of them are really exposed to higher risk real estate like shopping malls, offices, apartment buildings or other difficult markets. O is focused on premium retail tenants, MPW is focused on hospitals, and STAG gathers warehouse properties. No individual investor can buy these types of properties without a ton of investment capital. You might own a rental house, condo, or even a duplex or apartment building, but owning these other assets is out of your reach. Furthermore, when you buy a REIT, you have zero maintenance costs and tenant headaches.
If you want to know what all of the top ten REITs are, look at the final part of this post. All ten are shown in a Dividend Tracker image.
The Best of the Best is Realty Income Corporation
I like O for several reasons. It pays a monthly dividend and Realty Income has been paying a growing dividend for 25 years. They have been paying dividends for 28 years. The dividend is growing at a five-year rate of 3.37% and currently yields 4.4%. This is far better than holding cash. However, Realty Income is not a growth investment. It is an income investment only. Over the last ten years the value of the shares has increased 87%, but the last five have only been 13.2%.
Dividend Tracker View
Dividend Tracker is an iPhone app. I no longer recommend it, as it has some software bugs that have caused it to inaccurately show dividend income. Although I have informed the developer of the problems, he has not responded, and the problems have not been resolved. However, it is still useful as a quick way to see how our investments are allocated. Shown above are our top ten real estate investments.