It probably depends on the size of the town. If it's a small town, then your risks are high, if it's a larger city, and you're spread out in different neighbourhoods, your risk is lower.
It's the same if you only own one rental (high risk as a vacancy costs you money) or several (can help cover the costs of the vacant one). Of course one building has advantages (economies of scale), but also higher risk (if the building is in an unpopular area, vacancies become higher).
To me, the best way to mitigate risk is scale and diversity, the more you own, in he more areas, the lower the overall risks...assuming you didn't overpay in the first place, or some disaster strikes and wipes everything out...but then you probably have other things to worry about.
Right now, there aren't a lot of buying options that make sense, you need to buy where the deals are.
Rental property vs REIT
- SoninlawofGus
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- Location: Ottawa
Re: Rental property vs REIT
Can the following chart be right -- 600% vs. 200%? On the TSX charting function, I added "splits and dividends" to the chart. If I chart it without the dividends, they track fairly closely. I realize that dividends are a big part of the REIT story, I just would not have expected to see this level of out-performance. Granted, I wonder what this chart would look like in an environment of interest-rate increases.
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Re: Rental property vs REIT
Hmm, it does look extreme. When I compare XIC and XRE at, https://www.canadastockchannel.com/comp ... alculator/, it gives total returns (no DRIP) of XIC=219%, XRE=183%
and total returns (with DRIP) of XIC=256%, XRE=288%.
Note that this calculator automatically begins its comparison at the shorter start date of XRE on Oct 22, 2002 to the present.
And avg annual returns are XIC=8.4%, XRE=7.5%
and then with DRIP XIC=9.2%, XRE=9.9%.
and total returns (with DRIP) of XIC=256%, XRE=288%.
Note that this calculator automatically begins its comparison at the shorter start date of XRE on Oct 22, 2002 to the present.
And avg annual returns are XIC=8.4%, XRE=7.5%
and then with DRIP XIC=9.2%, XRE=9.9%.
- SoninlawofGus
- Veteran Contributor
- Posts: 1284
- Joined: 21 Aug 2007 12:10
- Location: Ottawa
Re: Rental property vs REIT
I'm thinking your numbers are correct. If I do the same plot on the TSX chart without dividends, the XRE lags by 40+% over 14+ years. Even with dividend reinvestment, I can't see the XRE dividend yield numbers returning 450% or so higher over that period. The yield difference would need to be fairly extreme.
Re: Rental property vs REIT
Long Run Data says XIC.TSX = 9.69% From Oct 22 2002 XRE = 9.94%
"Return isn't everything" - what about correlation or volatility did owning both help?
http://www.longrundata.com/
"Return isn't everything" - what about correlation or volatility did owning both help?
http://www.longrundata.com/
This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed
Re: Rental property vs REIT
Some 1, 5 and 10 year rolling returns. Note that XRE 5 year return is sometimes less then XIU/XIC.
Code: Select all
1Y 5Y 10Y
Year XIC XIU XRE ZRE XIC XIU XRE ZRE XIC XIU XRE
2005 25.9 24.5
2006 17.0 18.9 23.9
2007 9.6 10.9 -5.9
2008 -33.0 -31.1 -38.2
2009 34.4 31.5 53.4 8.5 6.6
2010 17.3 13.6 21.8 6.3 6.3 6.1
2011 -8.9 -9.2 20.9 13.9 1.1 0.7 5.6
2012 6.9 7.9 16.2 18.1 0.6 0.2 10.2
2013 12.7 13.0 -6.0 -4.6 11.6 10.6 19.8
2014 10.4 12.0 9.7 8.7 7.3 7.1 12.0 7.8 9.3
2015 -8.4 -7.9 -5.2 -5.2 2.1 2.7 6.6 5.8 4.2 4.5 6.3
2016 21.0 21.1 16.9 17.1 8.1 8.8 5.8 6.4 4.5 4.7 5.7