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Real estate value acquisition, real estate investing
REITs (real estate investment trusts) haven’t messed around this year, unlike the rest of the market. The Vanguard Real Estate ETF (VNQ) has firmly established fresh highs. The choice between the confident VNQ and the stumbling S&P 500 has been straightforward for us dividend stock traders. It’s usually ideal to ride the hot trend with short-term time spans!
REITs are on fire (the good type, not the 2020 dumpster variety), but they still have room to grow thanks to last year’s performance. A lot of perfectly fine real estate stocks were thrown out. As the 2020 stench dissipates from their shares, these are high-quality landlords still trading on the cheap side.
Don’t worry, we’re not just purchasing VNQ. By cherry-picking the sector, we can do better. Today, VNQ returns only 2.1 percent. The curse of all-time highs is that it never pays less.
By carefully considering our real estate investments, we can boost our payments and make them inflation-proof. Let’s take a look at three REIT industries that will gain from the increased money supply.
Apartment REITs: Stimmy Checks is the engine that drives this site.
The current personal savings rate in the United States is a staggering 27.6%. Our average customer has been sitting on a pile of cash since checks began appearing in mailboxes a year ago.
Savings and Stimulus Go Hand in Hand (Like a Horse and Carriage)

Rate of Personal Savings
The Federal Reserve was established in 1913.
ADDITIONAL INFORMATION FOR YOU
Rent is being paid with some of the stimulation (“stimmy”) cheques. This is advantageous to apartment REITs.
For these landlords, location is crucial. The emptying out of city centers has been dubbed “The Donut Effect” by economic academics Arjun Ramani and Nicholas Bloom. (The report comes courtesy of Bloomberg.) People are relocating to the suburbs and smaller towns.
After all, if the office isn’t going to reopen, why jam into a shoebox beside it?
This shift, for example, is a boon to Apartment Income REIT (AIRC). AIRC has 98 buildings totaling 26,599 apartment dwellings in major cities with high-paying jobs such as Los Angeles, Philadelphia, and Washington, D.C. The company specializes in higher-end residences with rents that are above market. Its typical rental apartment costs 17% more than a comparable property across the street.
The secret is to live in a higher-end apartment. These are the flats that have a spare bedroom that can be used for work. As inhabitants “donut” away from metropolitan centers, they are in high demand.
The AIRC ETF yields 4.9 percent, which is more than 100 percent higher than the Vanguard ETF!
Industrial REITs are still trading at 2020 levels.
Industrial landlords have a lot of money. They are about as recession-proof as it gets by renting to businesses and tying them into long-term leases.
Take, for example, W.P. Carey, a favorite of the Contrarian Income Report (WPC). Almost all of its leases feature contractual rent increases to account for things like inflation. And the consumer price index is linked to 62% of them (CPI).
The firm’s occupancy rate remained at an incredible 98.5 percent in 2008. In virus-infected 2020, it never fell below 98.9% occupancy. Amazing consistency!
WPC pays 5.5 percent today and grows its dividend every three months, and those increases could be boosted by the rising CPI numbers we’re now witnessing.
Mortgage REITs (mREITs) are a type of real estate investment trust. MSRs are needed.
Rising interest rates will put downward pressure on mortgage REITs’ high yields. Lower profitability and fewer mortgage originations are the result of higher rates. Furthermore, as interest rates rise, the value of existing fixed-rate loans decreases.
It’s no surprise that some mREITs have begun to hedge against higher rates by stockpiling mortgage service rights (MSRs). These are agreements that allow the holder to collect payments from a borrower.
These aren’t the loans themselves, mind you. They are the servicing rights for these debts. This is a minor yet significant distinction. MSRs have a tendency to appreciate in value in tandem with interest rates. They become increasingly attractive in this climate as servicing current loans becomes more cost-effective than originating new ones.
Contrarian Outlook’s chief investment strategist is Brett Owens. Get your free copy of his latest special report for additional fantastic income ideas: Portfolio for Early Retirement: Dividends of 7% per month for the rest of your life.
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