This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Old-School REIT Investing

Stocks in this article: O OHI HTA SPG ROIC

NEW YORK ( TheStreet) -- There are two schools of thought when it comes to investing in real estate investment trusts. I'm an old-school investor, meaning I live by the mantra of legendary value investor Benjamin Graham.

Value investing is part of my DNA, and when it comes to valuing commercial real estate, I try to filter out the best from the rest. I abide by the Graham-inspired words: "You are neither right nor wrong because the crowd disagrees with you. You are right because the data and reasoning are right."

The other school of investing is market timing, and although some speculators are probably capable of outlier success, the belief that REIT stocks are best traded, rather than owned, is a dangerous myth.

Dividends make up about 60% of a REIT's total return, and so the best way to benefit from a REIT is to hold the shares for a long period of time to take advantage of the power of compounding.

REITs' total returns have averaged double digits, and so they are attractive investments for the patient, long-term investor. Much wealth has been created by investors who buy and hold stocks of excellent companies. There is little evidence that traders or market timers have been able to make large sums of money consistently, and that applies to the REIT world.

To time REIT stocks with success, an investor must be able to forecast many variables: the direction of interest rates, real estate markets, capital flows, rates of inflation, unemployment, and other influences on real estate prices. That cannot be done repeatedly, and for 99% of investors, it isn't worth the effort.

REIT stocks are best suited for those seeking dividend income and modest price appreciation over time, corresponding with increases in cash flows and asset values, and they have only modest correlations with other asset classes.

Here are some of my favorite REITS: Realty Income (O), Omega Healthcare Investors (OHI), Healthcare Trust of America (HTA), Simon Property Group (SPG) and Retail Opportunity Investment Corp. (ROIC).

To learn more, check out my newsletter

At the time of publication, Thomas was long Realty Income, Healthcare Trust of America, Simon Property Group and Retail Opportunity Investment Corp.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs