In Ask Sherry, Investing, Money

Ask Sherry: Will I ever invest in real estate investment trusts?

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Have you ever considered investing on REIT ? What is your opinion on this investment ?

I have thought about it, and I would look into it as a viable source of dividend income.

In fact, many REITs have high dividend yields, but that to me, signals a bit of risk and volatility.

7% dividend yield?

That sounds a little high (which equals risk) for something like real estate where you can’t exactly up and move your properties to another place on a whim or are dependent on your tenant mix, location, etc.

That said, to clarify: real estate is NOT a bad investment.

I think real estate can be a GOOD investment, but I find that most people when they buy houses individually and use that argument to justify over-buying what they cannot afford as a personal home, squealing: But my house is an INVESTMENT!….


I can only hope that they have done their research before just blindly saying that their place is going to be worth what they put into it.

I also am not a fan of buying properties to rent them out as an individual. There is SO MUCH to think about with rentals aside from just covering the mortgage and fees.

You have to think about finding tenants, keeping them, maintaining their place, fixing it up & cleaning when they leave, checking to see that they paid on time and not giving them too much leeway until they take you for granted…. there is more than what people think with rentals.

REITs, I think are probably the only and safest way I will invest in real estate, however indirectly, and as part of a dividend income investing strategy. I wouldn’t put the farm into a REIT but I would buy a few after doing some research.

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Sherry of Save. Spend. Splurge.

Millionaire at 36 after getting out of $60K of student debt in 18 months, a little over a decade earlier, using TheBudgetingTool.com. Since then, I have paid my $600K home in cash (my half was $300K), my $180K casr in cash, worked 50% of my career (taking 1-2 year breaks), and quadrupled my income within 2 years of graduating, going from $65K to $260K with an average lifetime savings rate of 50%. I could retire today if I wanted, but love my work-life balance as a freelancing consultant in STEM (Science, Technology, Engineering, Math). I am all about balance - between time and money, and also enjoying my money. I also post daily on Instagram @saverspender.

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2 Comments

  1. PP Gal

    Have you already considered what REIT to invest in? I’ve had ZRE for a few years and so far things are going well considering that it yields monthly distribution (similar to dividends). So for those who doesn’t want to become a landlord but want to invest in real estate, REIT is worth considering.

    And there is also MICs or mortgage investment corporations which lend to people who couldn’t get a mortgage through banks. It’s a risky venture that comes with a higher interest rates for the borrower.
    MICs usually have quarterly dividends. But unlike REIT, the price appreciation of MICs are higher within a short period. MICs are bought as stocks and REIT as ETF. The cost of buying MICs is higher than REIT.

    For those with more time on their hands, it’s good to have REIT and MICs as part of diversification.

    Reply
    1. Sherry of Save. Spend. Splurge.

      I don’t really like the idea of MICs just because of the risky nature. I’d do a REIT but a big one, like RioCan for instance. I am in the midst of researching it, but what I want is to build a diversified portfolio, nothing too big, about $5000 in each stock so I can spread it out over a bunch of different areas.

      Right now I need to just plow money (cash) into investing but also to save aside a balance to live for the next year or so without working.

      Reply

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