|Hallmark of a Good Reit Chart|
We like to make sure we are vested in the first two camps. As they are the true ones that gives us peace of mind and support our retirements. For those that mismanaged or crook categories, timing matters. This is no fun. You need to be good at it. Maybe even have to be an insider.
This is some thing I seen that we need to be careful on. They dump weak sponsor properties into their Reit. They do misleading income support. Hardly AEIs. Consistent negative rental reversion. Weak portfolio. High borrowing costs. Keeps issuing rights from retailers. Large discounts of issue.
1. Never invest based on yield solely. This could likely be due to falling stock prices. And there are reasons why stock price falls. And the capital loss outweigh the distribution.
2. Inherent Risks of some Reits on high valuation
Some Reits give good DPU or Yield but the valuation is high based on NAV. Nothing wrong if they can continue to provide consistently. However market sentiments and ability of the Reit to maintain in the future can be a concern. And once they strike, you may suffer significant capital lose that negate many years of dividend returns.
3. Spiral down
When Reits are on down trend in stock prices from market, this can mean something is not right. DPU do not lie. A good Reit is able to attract Private Placement. So constant tapping on retailer for money is an indication something may not be right or doesn't add up.
Reits properties are their earning tools. If the property able to consistently get better valuation, this mean something on top of rentals. Do be careful on this one as I have doubt on their trustworthiness if they cannot get better rents or able to find tenants. Nevertheless is one of indication.
Management is proactive and innovative. They typically stays ahead of the game to make sure they do not spiral down. Keep their cost in-checks. Keep working on their portfolio and tenants.
1. Low borrowing costs
Significant Saving. This give management in strong advantage.
2. Strong command of rental income
Support growing DPU and AEI.
3. Growing portfolio valuation
Just by selling a piece of their property could allow rejuvenation of their DPU for long time after paying off the loans.
Need not be in 6% to 10% ranges. If we can find one that meet many positive experiences, is a gem. Good reits and trusts have low yield for a reason. Because they are Good.
Size matters. They can do AEIs without large impact to DPU.
6. Seldom needs to tap on retailers for money to grow. Private placements are enough most of the time. Usually they can also do AEIs or property swap.
7. High Stock Price Valuation
Some of this good Reits have high valuation. Nothing wrong if they can give you a future of growing DPU.
8. Growing DPU with Good Consistency
Hallmark of a good Reit if can be done long term. Need to make sure is not property dumped at high price with income support that could see a net decrease in value.