Skip to main content
No. of Recommendations: 72
Old time REITSTERS will certainly recall REITNUT, aka Ralph Block. For anyone new to this board, Ralph wrote the seminal book on REITS: "Investing in REITs." (1) Ralph was one of the original expert contributors to this board.

In 2013, we collaborated on a post "Portfolio for the next 50 years."

The concept was to create a portfolio for a young person just starting out that was in a low tax bracket by setting up a ROTH IRA account. Recall that ROTH accounts grow tax free and can be withdrawn tax free in retirement. (2) You might review the original post to get the full story. The post was written with an initial investment target of $2,000.

REITNUT chose 4 individual REITS that he thought would do well over the long term. The goal was that the investor would NOT have to make any sell/buy decisions over the next 50 years. Yes, it was a pretty ambitious goal that REITNUT accepted.

The four REITS he chose were:

Avalon Bay- AVB- High end apartments
Extra Space Storage-EXR- Self storage rentals
Simon Property- SPG- High end shopping malls
Ventas-VTR-Senior communities

I personally helped setup five ROTH accounts with these four REITS. Here are the results to date for one of the accounts. It had an initial investment of $2,500 and has had no funds added or withdrawn.(3) So this is a very pure look at how the portfolio has done:

June 6, 2013- $2,500 account value, AVB, EXR.SPG, VTR purchased in ~ equal dollar amounts
April 12, 2019- $4,805.33

50 year portfolio IRR= 11.81%
VNQ- Vanguard REIT ETF= 8.42%
SPY-Standard and Poors 500 ETF= 12.65%
The 50 year portfolio outperformed the REIT index by 3.38% which is equivalent to a grand slam home run in the world series. It did underperform the SP500 by 0.84%, likely due to the FANG stocks being strong in this period.

The annual income has increased from $83.84 to $172.25 which is a 105% increase. The IRR of the income stream is an impressive 13.09%. This verifies one of REITNUTS fundamental teachings: buy high quality, high growth, LOW dividend yield REITS to maximize the total return. REITNUT would often caution against buying lower quality, higher yielding REITS which is often the path that new investors are drawn to. All four of these REITS were considered low yielding when they were chosen. It is important to note that all of the dividends were reinvested back, so the increased share counts compounded with the per share dividend increases.

Here are the results for the four REITS from 6/6/13 through 4/12/19:

REIT Total Dividend Reinvested
Return Per Share Dividends

AVB 10.6% 6.2% 9.6%
EXR 20.1% 14.0% 18.0%
SPG 5.4% 10.4% 14.5%
VTR 2.3% 2.9% 8.0%

Clearly the star of the group so far is EXR. The laggard of the group is VTR, "Dynamite" Debbie Cafaro is in an out of favor sector for the time being. VTR is still regarded as best in class, so eventually the sector will likely mean revert and have improved performance.

All in all, I think our young investors are sitting pretty with 44 years to go. I so wish REITNUT was here to give his current updates. He used to tell me that that industry was constantly changing. That is why he agreed to do subsequent revisions of the book. He did not want REIT investors reading out of date info, so he devoted an enormous amount of time revising it. All for our benefit. In addition to his book, his numerous posts on this board, his love of golden retrievers, the 50 year portfolio is another contribution to his legacy. I remain eternally thankful.



(1) Investing in REITS, Fourth Edition

(2) Current tax law allows ROTH IRA's to be withdrawn tax free. There have been proposals that either the account balances become taxable and/or the withdrawals are. If you think forecasting REIT values in 50 years is hard, try forecasting US tax policy.

(3) The portfolio is not as "pure" as original. VTR spun off Care Capital Properties (CCP) which later merged into Sabra Health (SBRA). SPG spun off Washington Prime Group (WPG.) So the portfolio has small amounts of these stocks, which have NOT been sold. Their value was included in the portfolio total return, but was NOT included in the dividend return calculations.
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.