mREITs

[Ok Red]

My current port includes 5 REITs - DLR, VTR, STAG, O, OHI. I'm thinking about dabbling with an mREIT. Any suggestions?

[EricL]

My only suggestion would be not to do it. =)

[hendi_alex]

I would pick a BDC over an mREIT, though would pick neither in front of possible rate increases. At lease BDC's hold leverage down to 1X. MREITs can leverage up to 10X. At 10X leverage it only takes a heartbeat to burn through equity during adverse conditions. MREITs are even more vulnerable than levered banks because the REIT structure prevents them from accumulating any reserve funds, as 90% of profit mustbe distributed to shareholders. With REITs there is no such thing as a rainy day fund.

[TopRamenTrader]

Im down with the REITS i have a 2nd account that im playing with. I have OHI,VTR,IRM,ARCP,HCP

Got ARCP when they hit the floor, it could come back lol

was looking at O but i think i missed the train on that one.

These guys are right though they can get nuked at random.

But im 28 and i feel like gamblin a little.

[Be Here Now]

(01-09-2015, 01:53 PM)Ok Red Wrote: My current port includes 5 REITs - DLR, VTR, STAG, O, OHI. I'm thinking about dabbling with an mREIT. Any suggestions?

Dabbling can work if your timing is OK. However, I suggest you read the articles by Scott Kennedy on Seeking Alpha before making a meaningful commitment.

You might also want to look at the long term results of AGNC and NLY before totally believing the typical mREIT horror stories. Since it first started trading in 2008, the dividend reinvested annualized total return of AGNC is 21.24%. SPY is 8.19%. NLY is 6.38%. However, NLY continued to pay a dividend when the yield curve last became inverted, which predates AGNC. An inverted yield curve is potentially the most destructive environment for an mREIT. If you don't know what an inverted yield curve is, you should not own an mREIT. You can learn about it here and here.

I have since found a really impressive yield curve tool here.

[Dundey]

New kid on the block here, but I agree with the responses above. However, if you do want an mREIT look at Orchard Island Capital - ORC. I've owned it for about a year. Normally trades in the $12 - $14 range. It's a monthly payer that currently yields over 15%. If you can get it under $13 its a bargain. But these things do have to be watched carefully.

[hendi_alex]

IMO the high risk exotic financing segment (BDCS and MREIT s) are best entered via ETF exposure. REM is a cap weighted MREIT fund. I prefer a blend of the sector and opted for exposure via KBWD which is also more equally weighted. KBWD is focused on BDCs Which employ less leverage than MREITs. The fund also includes NLY and some of the stronger MREITs. It also has TGH plus a few banks. Consistent with my interest rate/spread concerns, this position is at a minimum weighting. The. weighting won't increase until the dierection of the interest rate cyle becomes a little clearer.