Rental property vs REIT

Leveraging, renting vs owning, making an investment or buying a home?
Just a Guy
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Re: Rental property vs REIT

Post by Just a Guy » 16 Jan 2017 13:18

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.

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SoninlawofGus
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Re: Rental property vs REIT

Post by SoninlawofGus » 06 Mar 2017 15:22

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.
Attachments
XRE.jpg

OnlyMyOpinion
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Re: Rental property vs REIT

Post by OnlyMyOpinion » 06 Mar 2017 17:17

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%.
xic-xre comparison.JPG

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SoninlawofGus
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Re: Rental property vs REIT

Post by SoninlawofGus » 06 Mar 2017 18:58

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.

BRIAN5000
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Re: Rental property vs REIT

Post by BRIAN5000 » 06 Mar 2017 19:53

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/
“Sometimes you are going to sell early and wish you would’ve held on, other times you will hold on a
little bit longer and wish you would’ve sold early - this is just part of the game.” - Frank Zorilla via Abnormal Returns

DenisD
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Re: Rental property vs REIT

Post by DenisD » 06 Mar 2017 22:00

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

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