Week 11: Rounding things out with some REITs

After purchasing shares of 50 different companies over the course of the last few weeks – looking to diversify and add some dividend-growth standouts I regretted not having in my portfolio – I continued to build things out by purchasing a few REITs this week.

Real estate, in my opinion, is a great way to generate long-term wealth. I always wanted it to be a part of my portfolio, but I guess I was conflicted with how to go about it. I rented out a condo my wife and I bought right out of college a few years back, and that worked for a bit, but there were too many moving parts for my taste. It was nice to get $1,000 a month in rent, but a fair amount of that went toward the mortgage payment and utilities. I didn’t mind a ton because I was basically doing nothing to collect the few hundred bucks in profit that was left over, but that all changed when the sump pump went bad and the basement flooded. The damages were minimal – I basically just had to rip out the old carpet and put in another – but again, it wasn’t my idea of a good time. Some people like to do little projects like that. I, though, would rather be hanging with family and friends with my feet up. I don’t mind getting my hands dirty, but if I had a choice, I’d rather be holding a beer than a tool.

Another thing I looked into was non-traded eREITs. Fundrise is a pretty solid choice for these. You can get access to properties that regular investors can’t, ideally meaning better returns, but the key to these is they’re really, really illiquid. Once you invest in them, your money is pretty much tied up for 5-7 years. If you want your money back sometime before then, good luck … you ain’t getting it. If you do, it’ll be because you paid some sort of a fee that pretty much wiped out all your gains. The illiquid nature of these things isn’t all bad. I mean, it’s good to park your money and let it go to work, but I have no idea what’s going to happen tomorrow, let alone 5-7 years down the road. It just didn’t sit well with me.

That said, option 3 – good old-fashioned, publicly-traded REITs (Real Estate Investment Trusts) – are what I feel most comfortable with. They have risks, sure, but I’ll take a little depreciation over bad tenants, costly repairs or illiquidity any day. They pay good dividends and you can sell them and get your money back whenever you want. I like the flexibility. On top of that, there are a ton of good ones out there … companies that offer exposure to a range of different types of properties. Like I said, I bought a few this week.

This week’s purchases: SPG, AVB, AMT, PSA and IIRP (all REITs)

To continue the trend of the past couple weeks, when I bought five companies from each of the 10 sectors other than real estate, I bought five REITs this week. I looked for REITs that paid growing dividends and offered exposure to an array of different industries (again, I’m making an ETF of sorts and want it to be as diversified as possible).

Here they are:

  • Simon Property Group (SPG)
  • AvalonBay (ABV)
  • American Tower (AMT)
  • Public Storage (PSA)
  • Innovative Industrial Properties (IIPR)

I bought a share of Simon Property Group, for $147.60. SPG manages real estate properties which primarily consist of malls, premium outlets and mills.

I picked up a share of AVB for $210.42. AvalonBay engages in the development, redevelopment, acquisition, ownership and operation of multifamily communities. Basically, it owns a bunch of apartment complexes.

American Tower is an interesting REIT because it owns, operates and develops multitenant communications real estate (cell phone towers). I grabbed a share for $230.69.

I added Public Storage (1 share for $262.27) to the portfolio because people are great at buying crap they don’t need or don’t have space for. What happens to that crap? Bingo … it goes into storage, quite possibly a unit owned by PSA.

Innovative Industrial Properties was a bit of a wild card pick, but I’m intrigued by it so I took a chance. It acquires, owns and manages industrial properties leased to experienced, state-licensed operators for regulated medical-use cannabis facilities. It’s obviously a bit volatile as it literally dropped some 12% or so a day after I bought it – I paid $102.33 for a share that’s worth $85.15 as of this post – but that’s what you get when you invest in the marijuana industry. I consider it a high-risk, high-reward sort of stock.

March with me

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