What is a REIT (Real Estate Investment Trust)?
Think about the shopping center in your neighborhood or that shiny Downtown skyscraper. Could you buy them? If you already own your house, could you buy another one? What about that big warehouse that is keeping all the products you buy online? Maybe that self storage location you pass by? No? There’s a good chance you can’t buy any of them since those investments are out of reach for the majority of the population.
Imagine now if a lot of people came together and raised enough money to be able to buy that mid-rise building with a bunch of apartments so you can boost your income. Would you participate? Who would get the calls from all the tenants? Who would be responsible for the renovation that will be needed eventually? Who would collect the money and deal with defaults? A Property Manager would certainly be required. If you need the money, would you be able to easily sell your share of the property?
In a simple way, the Real Estate Investment Trusts (REITs) came to free us from all of that burden that comes with Real Estate investing making it accessible to everyone. Through the Stock Market, anyone can buy a fraction of a tax-efficient company that holds many properties diversified in various locations and professionally managed. You can indirectly own many different property types such as Apartments, Self Storage facilities, Hotels, Hospitals, Restaurants, Offices, and many many more. And the best part, receive dividends — paid monthly or quarterly — on your portion of the income generated by that Real Estate portfolio. That’s passive income you earn while sleeping. That’s REIT investing.
It's the easiest, safer, hands-off, more liquid instrument to invest in Real Estate.
For a more in-depth explanation, please visit Investopedia | Real Estate Investment Trust (REIT).
How frequent is the data updated?
Although alreits.com is not a trading platform, we try to update Market data near real-time.
Market data include: price, dividend per share, dividend yield, market cap, price/ffo.
Financial data from Large Cap REITs are updated as soon as they are released. Other REITs might take a couple of days to be updated on the platform.
Financial data include: FFO, FFO/Share, Assets, Debt ratios, Portfolio information.
Sector and Geography Diversification data is updated at least once a year from audited reports.
Diversification data include: number of properties per country/sector/industry, size, number of states/provinces, percentage of revenue.
Why you don't collect Revenue and Net Income?
Unlike companies in other sectors, REIT analysis can be simplified to help beginner and seasoned investors clear up the clutter and focus on what's truly important. In the case of REITs, the Funds From Operations (FFO) and FFO/Share metrics are known to be the most important metric to be tracked by investors. FFO is the best - although not perfect - approximation of the cash flow generated by operations (including rents, proceeds from sales etc). Adjusted FFO or Normalized FFO are metrics that start from FFO but adds/removes other accounting entries the company judges important to provide a more accurate figure.
For a more in-depth explanation, please visit Investopedia | Funds From Operations (FFO).
Why you don't collect Adjusted Funds From Operations (AFFO)?
We do, but not every REIT will report AFFO. When they do, AFFO is the metric we collect. To avoid confusion, we decided to have a single metric called FFO that represents the most accurate figure provided by the company. In summary, if only FFO is reported, we collect that information. If both FFO and AFFO is reported, we collect only AFFO. A few REITs also call it Normalized FFO or NAREIT FFO. Again, our FFO represents the bottom line, with none or all adjustments reported by the companies.
For a more in-depth explanation, please visit Investopedia | Adjsuted Funds From Operations (AFFO).
What is the Ranking System based on?
Our Ranking System is based on the literature, primarily the book Investing in REITs: Real Estate Investment Trusts by Ralph L. Block. The scoring system does not take into consideration any subjective metric such as price, price/FFO, discount to 52w highs, sentiment analysis or analyst estimates. We have no control over those metrics. The market behavior in the short term is proven to be random and cannot be predicted. Longevity as a public company, FFO and FFO/Share growth rates, Dividend growth and Payout ratio, Debt analysis - these are facts that can be used to help investors understand the current financial situation of the companies. A high score doesn't mean the REIT will outperform the market, it just reflects the quality of the REIT. Because of that, the market will probably demand a premium on those REITs (higher-than-average price/FFO ratio). Use the Ranking System as a guide to the current financial performance of a REIT and not future returns.