Flip Tip Summary
Want to invest in real estate without having to deal with tenants and toilets? Real Estate Investment Trusts (REITs) are widely used investment vehicles at the institutional level, but probably not used enough for individual investors. If you want to own and get the benefits of real estate, without all the hassles, investing in publically traded REITs may be right for you. Ryan Daniel Moran tells is more in this FlipNerd.com Flip Tip.
Flip Tip Transcript:
Mike: Hey it’s Mike Hambright from flipnerd.com, and we have a quick VIP tip to share with you from Ryan Daniel Moran; who’s going to share a tip on the best kept secret in real estate investing.
Ryan: Okay Mike, I think the best kept secret in real estate investing is real estate investment trusts, REIT. REIT’s are publicly traded real estate investment companies and why more people aren’t talking about them I do not know. So these are companies that have holdings in some sort of commercial property and they’re legally required to pay out 90% of their profits as dividends and they’re traded on, you know, you can get them on eTrade or whatever you are using, on anything that will trade the stock market and rather than buying a house or buying a commercial property you can just buy a share in a real estate investment company. Now, because they are required legally to pay out 90% of their profits as dividends the dividend return on those investment is insanely high. They’re usually between 10 and 15% and that’s just the dividend. Here’s the weird part about them, as they go up in value they have to readjust the dividend or if they go down in value they readjust the dividend so right now my favorite real estate investment trust is AGNC, American Capital Group, and they got beat up recently because of some changes at the FED and they dropped from about $28 to $23.
So, if you were to buy now at $23 your return on investment is going to be, just on the dividend, 12% per year and it’s paid out monthly so your monthly cash flow is about 1% per month on that $23 a share. Well, if it goes up in value which most stocks do over a long period of time, if you hold that for a long period of time and it goes up in value to, let’s just say $30, they adjust to $30, they readjust the dividend to being on that $30 rather than on that $23 so now that’s about a 50% jump so if that goes up 50% now your return from just the dividends is 18% cash flow paid out monthly plus your initial investment has gone way up in value, it’s gone up 50%. So you get the appreciation just like you would get in real estate, you get the regular cash flow, the only thing you don’t get is the tax benefits of holding the real estate but you get all of the financial cash flow and appreciation that you would get in owning property but you get it on the stock exchange. Why more people don’t talk about these I have no idea but I’m investing heavily in real estate investment trusts and that’s why I call them the best kept secret in real estate investing.
Mike: Cool, hey Ryan, the one thing you don’t get is tenants and toilets to deal with.
Ryan: or late night phone calls, correct.
Man: Thank you for joining us on another flip nerd flip tip.
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Mike: Please note the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions, as real estate investing can be risky.
