jaturonoofer
I'm often asked, "Nick, what's your favorite REIT?" This sector is a fascinating one because many investors, like me, aren't interested in becoming landlords but still want exposure to real estate assets.
Long ago, I made the decision to avoid investment properties because I'm not handy and have heard too many horror stories about crazy tenants. That's why I prefer to buy REITs. They're more liquid, provide better diversification, and allow qualified professionals to manage their real estate portfolios for me.
When it comes to choosing the top REIT, it's not an easy task. There are only a handful of REITs worth owning, and two, in particular, stand out to me as the most reasonable candidates: Realty Income (NYSE:O) and Rexford Industrial Realty (REXR).
Comparing these two companies is like comparing apples to oranges. So, the answer depends on my priorities. If I want growth, then Rexford is my top pick. However, if I'm in a more income-oriented mindset, then Realty Income is the winner. With a yield of 5.17%, Realty Income's yield is nearly twice as high as Rexford's 2.69%.
Thankfully, when managing my portfolio, I don't have to choose just one REIT to own. I'm happy to be long both of these companies for years to come.
The Key To Success With REITs Is To K.I.S.S.
Unlike other areas of the market, the real estate investment model is unlikely to be disrupted. Making money with real estate is simple: find desirable properties, avoid overpaying, fill them with reliable tenants, and collect checks. This tried and true system depends on access to capital and the cost of that capital.
A K.I.S.S. (Keep it simple, Stupid) mindset makes the most sense when investing in REITs. Size, scale, and strategy are everything in the real estate sector. There's no need to reinvent the wheel; instead, figure out which company has the most talented managers, the best portfolios, strong cash flows, and easy access to low-cost capital.
Consolidation has been a constant theme in the industry, and REIT ownership of global property value points towards a long growth runway. Realty Income has been proactive in diversifying its holdings and expanding its portfolio through acquisitions, ensuring continued success in the sector.
It Doesn't Get Any Better Than Triple Net Lease Agreements
Realty Income is a triple net lease (NNN) REIT, which means the responsibilities of paying taxes, insurance, and maintenance fees are passed on to tenants. This lease structure allows Realty Income to generate adjusted EBITDA margins of over 95%. The reliability of cash flow and high yields make NNN REITs attractive, providing peace of mind during volatile market environments.
Realty Income: A Blue Chip And A Bargain
Realty Income has consistently outperformed its peers and continues to do so. The company acquires attractive buildings at attractive prices, with a strong record of rent recapture. Its management team continues to find larger acquisitions, demonstrating growth potential.
Realty Income's fundamental data and sustainable dividend record justify the hype around the stock. The company's occupancy record and historical re-leasing activity showcase its ability to select quality properties and generate stable cash flow. With an attractive valuation, O shares offer a margin of safety and potential for double-digit total returns.
In conclusion, Realty Income is my favorite high-yield REIT. Its reliable dividend, successful track record, and potential for capital appreciation make it an excellent choice for income-oriented investors. Stay tuned for my breakdown of Rexford, highlighting why it's my favorite high-growth REIT.
