# Income REIT



## QuickSilver

I've got a chance to buy into a new investment offering.  The company gives mortgages to large hotels and Corporations on commercial real estate..  I am guaranteed a 7.5% return as an income stream.   I've never done something like this, but my financial advisor thinks it's a good opportunity and he has personal money in a similar offering by the same Company.   It's a limited offering.. the Corporations are large and well known chains..  What say you?


----------



## jujube

I got out of investments a long time ago.  I'm a Nervous-Nellie and like to keep my money close and safe.


----------



## AZ Jim

I can only offer this, be careful.  I have no money to invest so I'm safe from loss.


----------



## QuickSilver

I'm not putting a whole lot of money in it..  It's just something I have never heard of..  He is looking to provide me with a guaranteed income stream..


----------



## AZ Jim

I'll hope it works out for you QS!


----------



## QuickSilver

I'm not worried about it..  It's not that much money..  I think my FA gets a bit of a commission..  It's the least I can do for him.  He has taken good care ov me.  He's got to make a living too.


----------



## oldman

QuickSilver said:


> I've got a chance to buy into a new investment offering.  The company gives mortgages to large hotels and Corporations on commercial real estate..  I am guaranteed a 7.5% return as an income stream.   I've never done something like this, but my financial advisor thinks it's a good opportunity and he has personal money in a similar offering by the same Company.   It's a limited offering.. the Corporations are large and well known chains..  What say you?



Not enough information. I need to read the prospectus.


----------



## QuickSilver

oldman said:


> Not enough information. I need to read the prospectus.




I have that...  Without giving out too much info,  It consists of a Capital investment group.  What it does is offer mortgages to large corporations like the Big Hotel chains,( Hilton is one of them.) and other Corporations buying huge buildings for Corporate headquarters, who cannot go through the traditional Banking system because of regulations.    The money is raised through private investors.   You have to be over a certain net worth and income level to participate.  Investors are guaranteed a certain rate of return.. in this case  7.5%.   At a point in time, the offering closes.   You can continue to keep your interest in the fund.. OR.. you can take it out monthly as capital gain and use it as an income source.   It is not as liquid as traditional investments.. There is a decreasing penalty up to 4 years.  Then no penalty.  Right now this particular fund holds the mortgage on 9 properties.   This is the 2nd offering of this particular company.  The first is operating as designed and my personal FA has some money in it.    This is how it was explained to me.


----------



## QuickSilver

NOW I feel like a fool.....    the term is  NOT  income WREATH..... but Income REIT  or Real Estate Investment Trust..   I should perhaps invest in a hearing aid lol!  because that's what I thought he said..   Here's is an explanation

https://www.reit.com/investing/reit-basics/what-reit



> A REIT, or Real Estate Investment Trust, is a company that owns or finances income-producing real estate. Modeled after mutual funds, REITs provide investors of all types regular income streams, diversification and long-term capital appreciation. REITs typically pay out all of their taxable income as dividends to shareholders. In turn, shareholders pay the income taxes on those dividends.
> *Other resources*:
> - The Basics of REITs
> - REIT FAQs
> - Glossary of REIT Terms
> - REIT Directory
> - REIT Indexes
> - Forming a REIT
> - History of REITs​REITs allow anyone to invest in portfolios of large-scale properties the same way they invest in other industries – through the purchase of stock. In the same way shareholders benefit by owning stocks in other corporations, the stockholders of a REIT earn a share of the income produced through real estate investment – without actually having to go out and buy or finance property.
> Most REITs are traded on major stock exchanges, but there are also public, non-listed and private REITs. The two main types of REITs are Equity REITs and Mortgage REITs. Equity REITs generate income through the collection of rent on, and from sales of, the properties they own for the long-term. Mortgage REITs invest in mortgages or mortgage securities tied to commercial and/or residential properties.




The REIT I am in is private and non-traded.  It is a Mortgage REIT.


----------



## oldman

OK, so I think I have an idea of what's going on. Basically, because the average Joe does not have the liquidity to purchase a single note, or whatever the instruments of investment are being called, you are purchasing a piece of the note with a consortium of investors. It sounds very similar to what insurance companies sell for similar purposes and is called a GIC. (Guaranteed Investment Contract.) Say each note, or whatever the instrument is called, costs $500,000.00. The average Joe would not have or want to invest that much money, so they form a consortium of investors that each puts in a percentage or dollar amount. Then, the investor receives a return as stated in the contract. The investor must keep their dough in the contract for a given period of time or face a penalty for early w/d. The only way the investor loses money is if the notes go unpaid by the borrower, then the lender suffers. More than likely, these contracts are not insured. 

Previously, I have been involved in similar deals and never lost any money, but after inflation and capital gains are paid, the return narrows. There is also state taxes to consider, if you live in a state that taxes all income, like Pennsylvania. These types of contracts are not hard to come by. Most insurance companies sell them with some minor differences. I have bought oil in a similar fashion. After all, who can afford to buy a barge of oil at a time? So, you join your money with other investors and buy long term contracts in hopes of making money, if the price of crude escalates. People have made millions doing this with many commodities like oil, gold, copper and so on. Or, some will just buy "call" options, which can be a lesser expensive way of investing and the returns may be higher, IF the price goes up. If you believe the price will go down, then you want to buy "put" options. 

Sorry, I went way off topic.


----------



## oldman

OH,REIT! That's a horse of a different color. Real estate REITS are OK, but like I explained earlier, they work the same way. Several companies sell REITS. Jim Cramer used to be a big investor in REITS. Myself, I have never invested in them because I was always more interested in equities, bonds and commodities. 

I do have investor friends that have and do invest in these instruments. That's where guys like Donald Trump borrow their money from. I just never got involved in them, so I better just pass on giving out anymore guidance. It's like any other investment. Do your homework and ask around to other investment firms what their opinions are. If you deal with Scottrade or Fidelity, they may be willing to help you.


----------



## QuickSilver

Thanks oldman... I feel better..   I think also that they place criteria on who can invest because it's not very liquid..  they don't want someone in for 6 months and then needs all their money out for some emergency.    As I said, I don't have a huge amount in this, but enough that I wouldn't feel very good about losing it.  However, it seemed like another spigot that can be turned on for income when I retire in 2 years. 


sheeesh... I could have sworn he said "wreath"  lol!!


----------



## oldman

I spoke with an investor friend of mine after I read your post and he does invest in these instruments. He said that when the market bombed in '09, like everything else, he lost his shirt on REITS because so many of them were part of the bundles that were being sold to the likes of Lehman Brothers along with derivatives and we all know what happened with those. But that was then and this is now. Real Estate is one section of the economy that has not turned around yet and although REITS are more connected to commercial real estate, I would tread slowly. Keep an eye on your investments on a daily basis, find out who the big REITS investors are and follow in their footsteps. I would also be watching to see who is putting their money in these instruments. If a guy like Cramer is investing in them, I would feel safe. Some people think he is a windbag, but windbags don't become millionaires over and over.


----------



## QuickSilver

oldman said:


> I spoke with an investor friend of mine after I read your post and he does invest in these instruments. He said that when the market bombed in '09, like everything else, he lost his shirt on REITS because so many of them were part of the bundles that were being sold to the likes of Lehman Brothers along with derivatives and we all know what happened with those. But that was then and this is now. Real Estate is one section of the economy that has not turned around yet and although REITS are more connected to commercial real estate, I would tread slowly. Keep an eye on your investments on a daily basis, find out who the big REITS investors are and follow in their footsteps. I would also be watching to see who is putting their money in these instruments. If a guy like Cramer is investing in them, I would feel safe. Some people think he is a windbag, but windbags don't become millionaires over and over.



That was the first thing out of my mouth... REAL ESTATE??!!    The housing bubble and subsequent crash and burn is still too fresh.


----------



## WhatInThe

I would've said yes on a REIT 10 years ago but now I wouldn't go long term. Don't put all money there either.

One of the local malls that went for over 100 million dollars around the turn of the century was just recently sold for about 30 million dollars. The company 'walked' taking the loss on their books. Malls are just one example of dying real estate investments around here anyway.

http://www.businessinsider.com/shopping-malls-are-going-extinct-2014-1

Throw in many casino businesses going bankrupt in which gambling can feed a town, resort or hotel industry commercial property is starting to look weak. I heard they can't even sell the closed Atlantic City New Jersey casinos at bargain basement prices.

http://www.nytimes.com/interactive/2014/08/11/us/crowded-market-for-casino-gambling.html?_r=0

They say from a real estate stand point a fund or group heavy in self storage may be 'a' strong market now because as much as they can charge is what they will charge for rent  profit from. Public Storage(PSA) is in the REIT category.


----------



## Butterfly

I would be very skeptical of REITs.  Seen too many of them bomb, and they are generally not transparent and therefore easy to manipulate by the Trustees, IMHO.


----------



## Bullie76

REITS are ok for a small component of your portfolio. I had one when I was younger and more aggressive. For retirees, I wouldn't put more than 5% in one. In the Fidelity Freedom 2015 Fund which is an all in one fund for someone retiring in this time frame, it has less than 1% in REITS. So as others have said, be conservative. I don't have any in one at the moment.


----------



## QuickSilver

The one I'm in has only 9 properties and all very large mortgages.  I don't have very much in it.. just about 2%.  Locked in for 4 years with 7.5% return guaranteed.


----------



## John C

Years ago, I was reading Kiplinger Magazine and became interested in REITs. Over time, I used my IRA to accumulate REIT stocks and used a discount broker for their purchase. I always felt more comfortable with those listed on the NYSE.  They continue to pay a good dividend and, being very carefully selected, have been a good investment.


----------



## Papa

I don't buy into any of these sort of "investments". I watch American Greed & Scams and see wayyy to many people with slick sales pitches and prospectus's that are flat out lies. Nothing against your financial advisor, he/she may be a fantastic person but the organization who put this together is who to be careful with. I side on the caution side, and only play with stocks/mutual funds.


----------



## QuickSilver

REITS are legitimate investments opportunities..  They are nothing new.


----------



## John C

Papa said:


> I don't buy into any of these sort of "investments". I watch American Greed & Scams and see wayyy to many people with slick sales pitches and prospectus's that are flat out lies. Nothing against your financial advisor, he/she may be a fantastic person but the organization who put this together is who to be careful with. I side on the caution side, and only play with stocks/mutual funds.



I've never had a financial advisor because I never found one I totally trusted.  I watch American Greed which everyone should watch so they will avoid those clever scams.  My Discount Broker has complete research on every stock, even including insider trading.  And I always get an Annual Report before I trade.  I may be a little too cautious, but I limit my trades of stocks to those listed on the NYSE. I have never recommended a REIT because I am retired and have plenty of time for research.  The best advice is to never buy a REIT stock unless you have time for doing the research.


----------



## Cali-Guy

QuickSilver said:


> I've got a chance to buy into a new investment offering.  The company gives mortgages to large hotels and Corporations on commercial real estate..  I am guaranteed a 7.5% return as an income stream.   I've never done something like this, but my financial advisor thinks it's a good opportunity and he has personal money in a similar offering by the same Company.   It's a limited offering.. the Corporations are large and well known chains..  What say you?


You are dealing with a NON-fiduciary "adviser" who stands to earn probably about a 10% commission IF you bit on the investment. Non-fiduciaries do not legally work for you. They are nothing more than salesmen. Do not trust them! 
There's endless articles on the internet about non-traded REITS. Avoid avoid avoid. 

 According to a study, 71% of non-traded REIT's _under_ performed their benchmarks


     Non-traded REIT's under performed comparable publicly traded REIT's by about *1.4 percent per year *during a 21 year period ending in 2011

Non-traded REIT's are illiquid. Why would you lock your money up in one of these? There's publicly traded index fund REIT's like VNQ that can be bought and sold at any time for any reason. 

Non-traded REITs are also highly risky. A lot of times you don't find out what they're worth until the very end. "Behringer Harvard REIT I" investors saw their final share values drop a whopping 53%. That 7.%% is merely interest payment rate. That's NOT annualized return on investment!


----------



## Stephen

My opinion on REITs
1. Only buy publicly traded REITs with a high daily trading volume. 
2. Buy equity REITs, not mortgage REITs.


----------



## Cali-Guy

Avoid non-traded REIT's. http://www.yourinvestmentadvise.com/non-traded-reits.html
I find it amazing that you want to do this salesman your are dealing with a favor. It's YOUR money and YOUR future! 
If you need help then go to NAPFA.org and hire a fee-only fiduciary adviser. Advice is not free. This will save you lots of money over time.


----------



## QuickSilver

Cali-Guy said:


> Avoid non-traded REIT's. http://www.yourinvestmentadvise.com/non-traded-reits.html
> I find it amazing that you want to do this salesman your are dealing with a favor. It's YOUR money and YOUR future!
> If you need help then go to NAPFA.org and hire a fee-only fiduciary adviser. Advice is not free. This will save you lots of money over time.



I am NOT dealing with a non-feduciary advisor.. and he is not a REIT salesman. How did you jump to that conclusion?   He has been our fiduciary advisor for 20 years.... and yes.. he gets a fee.


----------



## QuickSilver

Stephen said:


> My opinion on REITs
> 1. Only buy publicly traded REITs with a high daily trading volume.
> 2. Buy equity REITs, not mortgage REITs.




I completely disagree...   





> While non-traded REITs have relatively limited liquidity, they offer the same benefits as their publicly traded counterparts. By definition, the key benefit of non-traded REITs is that they are not yet publicly traded.
> 
> Subsequently, they offer the reasonably predictable cash flow of publicly traded REITs without the volatility incumbent in the public markets. Additionally, non-traded REITs receive the same tax benefits as publicly traded REITs. That is, by meeting certain requirements for taxable income distribution to shareholders, the REIT itself is not taxed, thereby reducing tax on the potential return on the investment, unlike traditional stock investing.


  - See more at: http://www.ccim.com/cire-magazine/a...ortfolio-diversification#sthash.eTkBMW8j.dpuf


----------



## Cali-Guy

> I am NOT dealing with a non-feduciary advisor.. and he is not a REIT  salesman. How did you jump to that conclusion?   He has been our  fiduciary advisor for 20 years.... and yes.. he gets a fee.


Well if he's the one who recommended a non-traded REIT I would be investigating if he is DOUBLE DIPPING on you! 
What does your written contractual agreement with this adviser say? Does it actually state that this guy is acting in the capacity of a "fee only" fiduciary?. In addition to accepting fiduciary responsibility to you in writing (via a signed contract), a  legitimate registered investment adviser will provide you with copies  of both parts of a "Form ADV", and provide you with a written disclosure  of *exactly how he will / may be compensated* for his services and list  any potential conflicts of interest. 

If all of that checks out then ask him SPECIFICALLY why this is a better investment than a low cost, liquid, publicly traded REIT index fund. There's a ton of reasons why non-traded REITS are inferior and more risky.


----------



## QuickSilver

Cali-Guy said:


> Well if he's the one who recommended a non-traded REIT I would be investigating if he is DOUBLE DIPPING on you!
> What does your written contractual agreement with this adviser say? Does it actually state that this guy is acting in the capacity of a "fee only" fiduciary?. In addition to accepting fiduciary responsibility to you in writing (via a signed contract), a  legitimate registered investment adviser will provide you with copies  of both parts of a "Form ADV", and provide you with a written disclosure  of *exactly how he will / may be compensated* for his services and list  any potential conflicts of interest.
> 
> If all of that checks out then ask him SPECIFICALLY why this is a better investment than a low cost, liquid, publicly traded REIT index fund. There's a ton of reasons why non-traded REITS are inferior and more risky.




I'm not going to argue with you...  It's not that big a deal for me...  It's a very small amount of money, and having worked with this adviser for so long and seeing my fortune grow under his guidance..  I tend to believe him far more than some stranger on an internet forum..  My feeling is that he has earned every dime he has made. He is not only a financial adviser, but has become a friend.


----------



## Cali-Guy

QuickSilver said:


> I'm not going to argue with you...  It's not that big a deal for me...  It's a very small amount of money, and having worked with this adviser for so long and seeing my fortune grow under his guidance..  I tend to believe him far more than some stranger on an internet forum..  My feeling is that he has earned every dime he has made. He is not only a financial adviser, but has become a friend.


Never mix friendship with business. If this guy is double dipping then it's no wonder he's so friendly. 
Secondly, it's not the advice of "some guy on the Internet". We're talking about facts and studies. You can read all about non-traded REIT's on the Internet. Ric Edelman is constantly warning people about them on his radio show almost every week. If you want to take a shot at real estate then there's low-cost liquid index funds that do that. No real estate index fund has ever turned out to be a Ponzi scheme or dropped 25% by surprise in one day. Advisers don't shave 10% off your initial investment with index funds either.


----------



## QuickSilver

Well... anyway... thanks for your concern... but so far I'm happy with my investment... it's working out.


----------



## Underock1

I have always had all of my money in various mutual funds to spread the risk. That worked very well for us over the years. At 80 plus, I now have it all in a money market fund, but am thinking about putting maybe a third back into an index fund.
Some time ago, I did have a portion in a REIT fund, and it did very well for us for a while. With interest rates so low, its impossible to find an investment without risk right now. What you have to ask yourself, is can I afford to lose this money. It does happen, but the likely hood of losing all of it is probably slim. One of the nice parts about investments is that, unlike a horse race, if you lose, you get a chance to run around the track again. Unless your horse dies of course. Just my opinion. As my mutual fund company likes to say; "Past results are not a guarantee of future performance." 
P.S. I just looked over the comments again, and I noticed you said "not very liquid..looking for long term investors" Everyone is different, but those would be red flags for me. I want immediate flexibility.


----------



## QuickSilver

Underock1 said:


> I have always had all of my money in various mutual funds to spread the risk. That worked very well for us over the years. At 80 plus, I now have it all in a money market fund, but am thinking about putting maybe a third back into an index fund.
> Some time ago, I did have a portion in a REIT fund, and it did very well for us for a while. With interest rates so low, its impossible to find an investment without risk right now. What you have to ask yourself, is can I afford to lose this money. It does happen, but the likely hood of losing all of it is probably slim. One of the nice parts about investments is that, unlike a horse race, if you lose, you get a chance to run around the track again. Unless your horse dies of course. Just my opinion. As my mutual fund company likes to say; "Past results are not a guarantee of future performance."
> P.S. I just looked over the comments again, and I noticed you said "not very liquid..looking for long term investors" Everyone is different, but those would be red flags for me. I want immediate flexibility.



Four years on this one. Guaranteed 7.5% return.   As I said... this is a very small sum of money... The bulk of my investments are in 401ks, Roths, 403bs, anuities, and I do own some personal real estate other than my primary residence.   If my adviser is making some money on this... and I hope he is... we all have to live right?  That said... I've never been a huge risk taker, and my adviser knows that..


----------



## Underock1

QuickSilver said:


> Four years on this one. Guaranteed 7.5% return.   As I said... this is a very small sum of money... The bulk of my investments are in 401ks, Roths, 403bs, anuities, and I do own some personal real estate other than my primary residence.   If my adviser is making some money on this... and I hope he is... we all have to live right?  That said... I've never been a huge risk taker, and my adviser knows that..



Four years is a long time in "Golden Year" terms, but 7.5 "guaranteed" (?) sure is a tempting return. 
 You seem at ease with the amount at risk, and they say the most important thing in an investment decision is can you sleep at night. You have to make the decision, but from your information, it seems like it might be worth a shot.


----------



## QuickSilver

Underock1 said:


> Four years is a long time in "Golden Year" terms, but 7.5 "guaranteed" (?) sure is a tempting return.
> You seem at ease with the amount at risk, and they say the most important thing in an investment decision is can you sleep at night. You have to make the decision, but from your information, it seems like it might be worth a shot.



well, thanks for your concern...   I guess I will have to see what happens..


----------



## Cali-Guy

QuickSilver said:


> Four years on this one. Guaranteed 7.5% return.   As I said... this is a very small sum of money... The bulk of my investments are in 401ks, Roths, 403bs, anuities, and I do own some personal real estate other than my primary residence.   If my adviser is making some money on this... and I hope he is... we all have to live right?  That said... I've never been a huge risk taker, and my adviser knows that..


You are chasing yield. Google the term. It's not a good thing. 7.5% is a red herring. The REAL question is how will it do versus it's comparable benchmark. As that study that I cited determined, 71% on non-traded REIT's underperform their benchmarks. Considering that non-traded REIT's are ALSO illiquid, I don't know what anyone would invest in one. 
Annuities? Did the same broker sell you that too? If so I wouldn't feel so sorry for him. Again he is taking you to the cleaners. It's your future. If you like giving it to an over-paid salesman then enjoy. Non-fiduciary "advisers" (salesmen) usually make over 100K or more per year. 
Not a big risk taker? Fine. Invest more in bonds. It's that simple. Salesmen LOVE to prey on people who are ignorant of diversification into bonds. Bonds smooth out stock volatility. The two also balance each other out. When stocks fall, money runs to the safety of bonds and vice versa. Don't expect a commission-based adviser to educate people on that as they are trying to sell you that expensive high-commission, illiquid annuity or non-traded REIT.

7.5% is not guaranteed. And getting all of your principal back is certainly not guaranteed. Over that last few years, index fund REIT's have done over 11%. Just sayin'. Is that REIT called Nexregen by any chance? 

*According to  the White House Council of Economic Advisers,  conflicts of interest shaves off on average 1 percent per year from  retirement savings.*


----------



## QuickSilver

You are far too concerned.... Thank you for your attention.


----------



## Cali-Guy

QuickSilver said:


> I've got a chance to buy into a new investment offering.  The company gives mortgages to large hotels and Corporations on commercial real estate..  I am guaranteed a 7.5% return as an income stream.   I've never done something like this, but my financial advisor thinks it's a good opportunity and he has personal money in a similar offering by the same Company.   It's a limited offering.. the Corporations are large and well known chains..  What say you?


NEVER invest in non-traded REITs, which is what this is. This adviser you are dealing with is a non-fiduciary (a salesman who does not legally work for you). That 7.5% is NOT guaranteed. They can lower it if times get tough. If you are in love with real estate then just buy an index fund like VNQ through any deep discount brokerage like E trade. Publicly traded securities like VNQ can also be sold at any time for any reason.


----------



## John C

I invest in REITs only because I'm retired and able to watch the market on a daily basis.  Even then, I have to be very careful.  If a REIT does not trade on the NYSE, I don't consider it.  Years ago, I read an article about REITs in the Kiplinger Magazine and bought a REIT stock for my IRA.  Some 40 years later, I still own that stock.  Although being careful, I bought some REITs that went bad.


----------

