Investing in REIT's

[Nutria]

Both. But there are a variety of different REITs. Some are high flyers with unbelievable dividends, but have equally high flying (and volatile) investments. Novastar was a REIT poster child in the early 2000s, but got smoked badly in the crash, due to their subprime exposure.

http://nypost.com/2007/02/23/dreams-fall-on-novastar-reit-wreck/

http://seekingalpha.com/article/47501-novastar-cancels-dividend-to-lose-reit-status

The 2008 timeframe might be a good litmus test for selecting a REIT: How did ABC REIT perform in that period and the years immediately after ?

https://finance.yahoo.com/quote/VGSIX?ltr=1

VGSIX lost 72% of it's value from Feb 2007 to Feb 2009. Took almost 8 years to regain it's peak share value.

I wonder what it's yield was back in 2009. (That would have been it's saving grace...)

[james.hendrickson]

People talk about REITS like they are mindless machines - e.g. based on some set of technical criteria, the machine will produce a divided return for all future time. This could not be further from the truth.

What a lot of people don't understand is that REITS are companies, run by humans, which means that return will depend on the quality and diligence of management and management processes. This is going to vary a lot depending on how strong the management team is.

[corn18]

TexasHusker should open a REIT. I might invest in that.

[kv968]

Investing in publicly traded REIT's is no problem. However I wouldn't invest in private REIT's such as Fundrise offers. There's is practically zero liquidity in them and a very constrictive redemption policy if you can get out of them at all. Plus there is substantial "legalize" associated with these private investments that severely inhibit the investor.

Not that you want to read through it all, but here's just a snippet of the 180 page legal document Fundrise posted about their "B" shares. In a nutshell, this particular excerpt is saying you waive the right as a shareholder to "inspect their books":

"By purchasing shares in this offering, an investor agrees to waive certain inspection rights set forth in Section 220 of the General
Corporation Law of Delaware, which limits such investor’s ability to obtain certain corporate information from us.

Section 220 of the General Corporation Law of Delaware allows a stockholder of a company to inspect for any proper purpose, a
company’s stock ledger, list of stockholders, and other books and records and the books and records of a company’s subsidiary in
certain circumstances. By purchasing shares in this offering, investors agree to waive the inspection rights set forth in Section 220 of
the General Corporation Law of Delaware. Despite our obligation to publicly file certain reports under Regulation A, such waiver will
limit an investor’s ability to obtain information from us for certain proper purposes under the General Corporation Law of Delaware,
which may prevent or delay an investor from evaluating our business or such investor’s investment in our securities."

Again, stick with publicly trade REIT's.

Kevin

[Nutria]

Not that you want to read through it all, but here's just a snippet of the 180 page legal document Fundrise posted about their "B" shares. In a nutshell, this particular excerpt is saying you waive the right as a shareholder to "inspect their books":

"By purchasing shares in this offering, an investor agrees to waive certain inspection rights set forth in Section 220 of the General
Corporation Law of Delaware, which limits such investor’s ability to obtain certain corporate information from us.

Section 220 of the General Corporation Law of Delaware allows a stockholder of a company to inspect for any proper purpose, a
company’s stock ledger, list of stockholders, and other books and records and the books and records of a company’s subsidiary in
certain circumstances. By purchasing shares in this offering, investors agree to waive the inspection rights set forth in Section 220 of
the General Corporation Law of Delaware. Despite our obligation to publicly file certain reports under Regulation A, such waiver will
limit an investor’s ability to obtain information from us for certain proper purposes under the General Corporation Law of Delaware,
which may prevent or delay an investor from evaluating our business or such investor’s investment in our securities."

Most laws just can't be waved away just because some lawyer writes up an implicit waiver. If a shareholder sued, I'm sure this would get laughed out of court.

(Not that I'd even consider buying shares in such a company in the first place...)

[thestrongprofessional]

Thanks for the advice

Hey guys,

Thanks for all the great advice and I'll be sure to take into account when making my decision.

Raphael

[kv968]

Most laws just can't be waved away just because some lawyer writes up an implicit waiver. If a shareholder sued, I'm sure this would get laughed out of court.

(Not that I'd even consider buying shares in such a company in the first place...)

These aren't publicly traded nor SEC regulated so the contract can say pretty much anything it wants and if you sign into the deal it very well may hold up in court.

[TexasHusker]

TexasHusker should open a REIT. I might invest in that.

I'm working on a worm farm REIT right now.

[Nutria]

These aren't publicly traded nor SEC regulated so the contract can say pretty much anything it wants and if you sign into the deal it very well may hold up in court.

Where does that logic end, though? "Your honor, I shouldn't be accused of murdering the victim because he signed a contract and gave me $100 to shoot him in the head. So I did."

IOW, you can't sign a contract which allows illegal activity.

[kv968]

IOW, you can't sign a contract which allows illegal activity.

True, but there's nothing illegal about a private entity telling you you can't really "look into their books" if you invest with them and that's what that clause in that particular contract is stating.