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Why I Won't Buy REIT ETFs


  • REITs are offering a historic opportunity.
  • You could profit from them by buying an ETF or individual REITs.
  • I present 5 reasons why I won't buy a REIT ETF.
  • High Yield Landlord members get exclusive access to our real-world portfolio. See all our investments here »

High profits with ETF on the international stock exchanges


REITs (VNQ) are very opportunistic right now.

They have crashed and now essentially offer an opportunity to buy real estate at a large discount to its fair value with the added benefits of liquidity, diversification, and professional management.

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This article was written by

Jussi Askola, CFA profile picture

Jussi Askola is the President of Leonberg Capital, a value-oriented investment boutique that consults hedge funds, family offices, and private equity firms on REIT investing. He has authored award-winning academic papers on REIT investing, has passed all three CFA exams, and has built relationships with many top REIT executives.

He is the leader of the investing group High Yield Landlord, where he shares his real-money REIT portfolio and transactions in real-time. Features of the group include: three portfolios (core, retirement, international), buy/sell alerts, and a chat room with direct access to Jussi and his team of analysts to ask questions. Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of HOM.U; CCI; CPT; WPC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (20)

Buyandhold 2012 profile picture
$RICK is up 407% in the past ten years.
Jussi Askola, CFA profile picture
@Buyandhold 2012 Yes that's not too bad, even despite its recent crash
Buyandhold 2012 profile picture
No exchange traded funds for me. Ever.

You can make more money buying individual common stocks.
@Buyandhold 2012 - true but most folks haven’t been able to beat QQQ.
Great article. Reasons 2 and 4 resonate the most with me.
I love using ETFDB but can never pull the trigger because of so much exposure to externally managed REITs.

Another reason is that personally I do not want to own certain REITs including casinos and prisons, which is unavoidable with certain ETFs. I even sold one of my favorite holdings, EPR for that reason.
I would not buy REIT ETFs -- they are meant for hedging (shorts or options). IYR is a better choice for REIT hedging purposes due to the liquidity of options and structure.
Jussi Askola, CFA profile picture
@jhmillerster Thanks for sharing your thoughts
High Yield FIREVestor profile picture
Buy RICK and call it a day
High Yield FIREVestor profile picture
@IloveDivys grossly undervalued, unfairly punished with strong upside possibility. Trading at a steep discount to NAV
@FirstFIREWealth I see PEP growing faster than RICK in my opinion
@Jussi Askola Good piece generally. What about the RIET ETF? Does fall into some of your points, such as included some REITs with problems. But almost 10% yield, and not market cap weighted (not equal weighted but close). I’ve built large positions in a number of REITs, with your help. Not enticed by additional REIT positions at this point, I’ve created a decent-sized one in RIET to add to my portfolio cash flow.
Jussi Askola, CFA profile picture
@Catskills1 There are some exceptions to consider. RIET could make sense as an example if you like mREITs.

And again: no approach is perfect. ETFs can make a lot of sense for many people.
@Jussi Askola One goal for me is REIT income, but also share price appreciation. So my investment in REIT ETFs will be limited to about 10% max of my REIT portfolio. The same is true of my non-REIT holdings, about 10% ETFs, e.g., EWZ, which complements a couple other Brazilian company holdings with a nice dividend.
RNP and RQI are notable ETFs to consider.
Jussi Askola, CFA profile picture
@SaratogaRacing They are not ETFs. They CEFs. I think that ETFs are better for passive investors.
@Jussi Askola Agree. And also costs and leverage can be high with CEFs
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