Well, four apartment REITs (WRI, CLP, ASN, EQR) I have been noticing in the
last year are all up 50% or more since 2000. Maybe that's not meaningful;
your call.

<revheck[at]linuxwaves.com> wrote
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- quote -


This is true for construction REITs, but my understanding is that
apartment REITs have not done so well.

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To hedge against rent *increases*, I think you just need to invest an
amount equal to one year's rent.

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Agreed. But what practical investment is better?


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They are tied to *average* local wages, not necessarily wages in my
industry.

,> rent in an area with strong rent control, and > rent a property
- quote -

Not an option for me.

A few months ago when I was shopping for REITs, I found myself using two
stock screeners:

1. http://screen.yahoo.com/stocks.html , selecting "Real Estate Operartions
(services)." About 247 stocks should come up. Click on each symbol in turn,
then go to its profile to see if it's specialized in apartments and where.
Yahoo has a fund screener, too, with "Specialty-Real Estate" being a filter
setting.

2. http://screen.morningstar.com/StockS...=StockScreener ,
set stock sector at "Financial" and the stock type at "hard assets."
Morningstar also has a mutual fund screener.

The data at both these sites is _not_ always up-to-date.

I am pretty sure all the apartment REITs I've ever seen have properties in
several states. I would bet there are REIT ETFs, but I haven't gone looking
for screeners for them.

Note: I don't necessarily advocate the plan you are proposing. I hold some
REITs to maintain a diverse portfolio and some income. At the moment, I
think they're generally somewhat overpriced; they've had a nice ride the
last few years, and you should read up on why that is. I'd be very picky if
I were you.

<revheck[at]linuxwaves.com> wrote
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Samson wrote:
- quote -

I don't believe there are any REITs that are that specific. The most
specific you can get is west coast. And even then, they may include
retail and commercial properties.

Here are some sites that may be helpful:

http://www.dividenddetective.com/reit_directory.htm
http://www.investinreits.com/findaREIT/findareit.cfm

beliavsky[at]aol.com wrote:
- quote -

It's funny how one government action favoring stable housing & long-term
occupancy (rent control) can be construed as "theft" while another
(mortgage interest deduction) doesn't get the same stigma. Homeowners
benefit from the theft of tax revenues, renters benefit from the theft
of rent control, we're all a den of amoral thieves!

Seriously, I know local landlords who are perfectly happy with rent
control because of the stability it introduces into pricing and
long-term cash flow projections. You find that buildings are priced
according to tenant mix, it's just another factor in valuation. Very
much like a stock - either has growth potential, or doesn't. One
explained to me that he likes it because it's more difficult to buy when
rents have a lot of volatility and you don't know how long they'll
stick. Simple economic models bear this out.

And by your reasoning you shouldn't use the products of any regulated
industry, whose profits are limited by that regulation...your "theft" of
their profits are therefore immoral. Skip the shower today?


- quote -

This isn't true, you're speaking of one type of rent control and the
laws are different in each area that has adopted a rent ordinance. If
you rent it's important to understand the rules in your area and rent a
property accordingly. Some people here in SF are surprised to find that
their building isn't covered by the ordinance (though most are). If
you're not covered you should be willing to pay a lower rent to
compensate you for the risk. And rents here seem to bear that out to a
certain extent.


- quote -

That's not tied to rent control really. There's a web of laws in every
state and many locales that govern landlord-tenant relationships. If a
landlord can get away with poor maintenance it has to do with the laws
about upkeep, not rent control.


- quote -

You're right, we've got simply awful quality of life here in SF. And it
would have been so much better if the dot-com transplants had driven the
last of the normal people out of the city in 1999!

-Tad

Tad Borek wrote:

<snip
- quote -

"Rent control" is theft from landlords. Besides the moral problem of
benefitting from theft, some practical issues are that

(1) Rent-controlled apartments have below-market rents and are thus
very difficult to find.
(2) Landlords have little incentive to maintain rent-controlled
properties.
(3) A place where rent-control policies are still in effect is likely
to have other zany tax and regulatory policies that cost money and
reduce the quality of life. New York City and San Fransisco come to
mind.

revheck[at]linuxwaves.com wrote:
- quote -

This is kind of an academic question because the amount of cash you have
is probably a lot less than what you'd need to truly hedge your
potential rent increases. A perfect hedge would be...well, buying a
share of an identical building to the one you live in, in the area you
live in, so your stream of rent payments received equals the ones you're
paying out. Of course at that point you're just buying a home right?

Your principal hedge against inflation is going to be your earnings,
unless you have a lot of money to invest. Rents and housing expenditures
are tied to wages, even though that's drifted a bit out of line lately.
Long-term you can't get blood from a stone and people aren't going to
put 70% of their income into housing. And rational people won't keep
buying homes when, as the WSJ says is the case here in SF, the cost of
renting is 55% lower (their analysis is a little simplistic but the
basic point is valid).

I don't think a local apartment REIT is a good idea except in the
theoretical sense. If you buy a REIT you'd take on company-specific
risks and asset-class risks that are probably much greater than the
inflation protection upside from the investment. And again you'd need to
make a big investment to generate enough cash to make it a true hedge.

If you really wanted to pursue the "best strategy" for long-term rental,
I'd say, rent in an area with strong rent control, and rent a property
you really like, that is unlikely or unable to be converted to
condominums. Not a hard find here in SF, especially while everyone seems
to be distracted, overbidding on $1.1M 2BR condos.

-Tad

beliavsky[at]aol.com wrote:

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Liquidity cost and basis risk will increase the error in the hedge
calculation. This estimation error will likely wipe out any benefits
of the hedge. Anyway, what you described is not a hedge - it's a
leveraged position.

Thanks.

After making the original post, that's what I concluded too. However,
I'm having trouble finding funds that specialize in apartment REITS,
and not home construction speculation. The latter is what you want to
avoid.

Any suggestions?

Also, are there ETFs that specialize in apartment REITs?

revheck

beliavsky[at]aol.com wrote:

- quote -

Searching Google I haven't come up with any so I'll ask:

Does anybody know of a SF Bay Area based REIT or SF Bay Area based
REIT mutual fund? It's well known that home prices there are
absurdly high and rents, while high have actually been dropping a bit.
I'm working if there might be some value in a REIT there.

revheck[at]linuxwaves.com wrote:

- quote -

The best hedge may be investing in an apartment real estate investment
trust (REIT), especially one whose properties are mostly located in the
region where you live. The value of a REIT depends largely on the
amount of rent it can collect. Many REITs are traded on a stock
exchange. Unless you have time to study invidual REITs, I recommend
purchasing a REIT mutual fund, although its returns may be less
correlated to your future rental costs.

revheck[at]linuxwaves.com wrote:

- quote -

Working for a company that compensates you for inflation. If you
don't have one - get one.

What is the best way for a renter to hedge against future rent
inflation?

There have been a number of articles recently (The Economist, Business
Week) arguing that in many U.S. housing markets the real returns on
future housing investments are unlikely to continue at the high rates
of the last decade. They argue that young couples may be better off
renting long-term than buying. This is especially true in regions where
the ratio of house price to rental costs
greatly exceed historical averages.

Let's assume a couple has definitely decided to rent for the long term.


They are still exposed to future rent inflation risk. What is the best
way to invest their extra cash in order to hedge against this risk.

revheck