Real Estate Experiment 1: UP 19.2%
Last year, I determined that I wanted to invest in Real Estate, but that buying physical real estate was not feasible due to being far away and lacking the credit for a proper mortgage. I'm working on the credit part (that's what I get for not using a credit card or being in debt for my whole adult life), but the whole "being overseas" part isn't going to change any time soon.
So, instead of buying a house and renting it out and managing my property managers, I decided to buy a REIT, well, not the whole thing, but $10,000 of shares in Neuberger Berman Real Estate Securities Income Fund Inc. (NRO)
At that point, I liked that it had a monthly dividend and was paying a 10.42% dividend per year. The dividend has decreased to 8.57% per year, but the values of the shares has increased from $5.18 per share when I bought it, to $5.60 as of today. So, the value of the original shares alone went up 8%. That's not bad! But it doesn't even include the monthly reinvested dividends.
See, every month this REIT releases a dividend (cash money), and that dividend is automatically used to buy more shares of NRO, That means that every month I have more shares, and with more shares, it has a higher dividend, which buys even more shares. It's a virtuous cycle if I ever saw one.
Here's a chart of how much the dividend was each month and how many shares I had after it automatically purchased more with the dividend.
I started with 1926 shares and now I have 2129 shares. The income from it dipped a little when interest rates were raised last fall, but then has increased since then. In the year, I've received $990 in dividend payments, which is another 9% of returns.
The combination of a raise in the value of the REIT, which is probably largely due to keeping interest rates low (and Trump trying to keep them that way, he is a real estate guy, after all), more than anything amazing in the management of the REIT itself, and the dividend has made this a very good investment this year! When you compare it to my index fund, VTI, which tracks the whole US stock market, it's up more than 17% compared to the Vanguard fund over the same time period.
A 19.2% return is fantastic. As I don't have any US income for my taxes, I don't have to worry yet about the higher tax rate for dividends. That means that for me, I can make dividends a bigger part of my financial freedom plan, because I plan to live overseas when I retire as well, so that shouldn't get me killed by dividend taxes ever. Hopefully it will stay that way for a while!
As a result of this year, I'm going to add to this purchase. I'm going to add another $5,000 before the end of December. Next year, if things don't collapse, I'll add more. I'm going to try to wait until our fearless orange leader says something inflammatory to drop the markets a decent chunk before I buy more, but you know that's going to happen. Yes, yes, I know that's market timing, and that market timing is bad, but I think you can pretty much set your clock by the irrational explosions of idiocy that come from Twitler's mouth.
Experiment 1 was a success! My money grew by a good amount, I have an income producing asset, and I don't have to take calls from tenants who need their toilets fixed.
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