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An important part of the collapse of the US & world economy was because of the huge real estate and debt bubble that had been created. Now, as things get back to normal, there are deals to be made in the real estate arena. I know of quite a few people who have gone to buy real estate properties in places like Nevada, California and Florida. When you compare the prices of real estate to those of other areas or those of even a few years ago, it certainly looks like a very good investment.
And when buying a well located house or condo in Miami or Fort Lauderdale for 140-150K, how much lower do you think it can go? Just seems like there isn’t much downside to those prices, especially compared with a longer term price appreciation. If the prices simply went up 25-30% in the next 3-4 years, that would represent a very good investment as well as good diversification from the stock market.
Why not simply buy a house in Florida?
But of course, taking a plane to buy a place in those areas is a lot more complicated than most investors want to handle. There are a lot of logistics involved, legal and tax implications. So buying through a fund would seem like the ideal solution wouldn’t it? And of course, given my take on why ETF’s are superior to mutual funds, I will not be talking about real estate mutual funds but rather the main real estate ETF’s.
Here is a list of the main actively traded REIT’s (Real Estate Investment Trust)
Ticker Name Market Cap Price YTD return
REM iShares FTSE NAREIT Mortgage Plus Capped Index Fund 49507312 14.78 0.475865
IFEU iShares FTSE EPRA/NAREIT Developed Europe Index Fund 8580000 29.003 -1.013648
RWO SPDR Dow Jones Global Real Estate ETF 102465000 31.530001 -1.867415
REZ iShares FTSE NAREIT Residential Plus Capped Index Fund 37325000 30.35 -1.894235
IYR iShares Dow Jones US Real Estate Index Fund 2496403968 44.950001 -2.112364
FRI First Trust S&P REIT Index Fund 23075850 11.44 -2.389084
VNQ Vanguard REIT ETF 4744589824 43.630001 -2.481003
RWR SPDR Dow Jones REIT ETF 1011371008 47.919998 -2.62142
RTL iShares FTSE NAREIT Retail Capped Index Fund 4044340 20.7703 -2.760771
FTY iShares FTSE NAREIT Real Estate 50 Index Fund 26840000 26.98 -2.8448
IFGL iShares FTSE EPRA/NAREIT Developed Real Estate ex-US Index Fund 313575008 28.02 -3.112032
PSR PowerShares Active U.S. Real Estate Fund 10864020 36.213402 -3.223986
FFR First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund 23388060 29.429001 -3.574704
FIO iShares FTSE NAREIT Industrial/Office Capped Index Fund 10242000 22.860001 -3.625627
IFNA iShares FTSE EPRA/NAREIT North America Index Fund 6264020 31.769899 -4.307534
URE ProShares Ultra Real Estate 586113600 6.58 -4.499274
IFAS iShares FTSE EPRA/NAREIT Developed Asia Index Fund 19159000 27.555599 -4.717845
You will notice that about half of those ETF’s are Ishares ETF’s. Even given Ishares’ #1 position in the ETF market, I’m still very surprised to see how many ETF’s it has. However, Vanguard’s only REIT ETF (VNQ) is by far the biggest and is actually bigger in size than all Ishares ETF’s together! It tracks the MSCI REIT Index and would be my first choice when looking for a real estate ETF apart perhaps for someone looking for a more regional exposure to Europe or Asia.
What are your thoughts on real estate in general? And do you have any real estate in your portfolio or only through your own properties?
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I think that best bargains are out there in South Florida foreclosures! However, you need to be cautious. First, not everywhere in Florida is good to buy (location, location location like they love say at HGTV channel). Also, when you are buying foreclosures, property’s condition is not well known and an interior inspection of the property may not be possible before the sale… And there is no financing, so you need lot of cash!!
I don’t have any real estate investment. However a good alternative is to invest in a REIT ETF. VNQ seems like a good choice. And the expense ratio is the lowest among all of the ones in your table.
Questions: What’s the proportion of commercial real estate in the MSCI REIT Index? What do you think are the trends of commercial real estate compared to residential real estate?
Thanks!
I have been buying Canadian XRE (if I do not own real estate at least to own some through proxy).
However, it seems that the commercial real estate is going to collapse soon (according to what I’ve been reading) so I am quite fearful it will catch me with my guard off.
[...] 2010 Stock Picks: REIT ETF’s posted at Intelligent Speculator, saying, “An important part of the collapse of the US & world economy was because of the huge real estate and debt bubble that had been created. Now, as things get back to normal, there are deals to be made in the real estate arena.” [...]
@Cynical Investor – Would have to look but is XRE mostly Canadian real estate? If so, I would think the potential problems are not as serious. If it’s US, bit more complex but I would keep it in a diversified portfolio
[...] for ETF solutions to hedge inflation. Vanguard actually has 4 of the top 10 spots including the REIT ETF VNQ that I discussed last [...]
[...] publishing an introduction to real estate ETF’s in February, we’ve received many questions regarding the differences between each of these [...]
bargain ? howabout go short,
REITs superior to mutual fuinds?
HOW so ?? Re taxes, maintence, declining rents.
RE and REITS are shirts
bud
@Buddy – Yes this year has been a year to be short, like almost everything else:) But I would say that prices will recover. Trying to pick the bottom is almost impossible
What I meant was comparing REIT ETF’s to REIT Mutual Funds. They are a lot cheaper in terms of overall fees. That is what I meant:)