Can you hedge real estate?

schizo · Dec 28, 2023

long said:
The black swan event the guy is trying to hedge against in the commercial credit squeeze that is supposed to start happening in force next year. Short term loans will be coming due and have to re-up at the new higher rates of sell out. That is an event that could definitely cause a drop in the market as it would hit banks pretty hard.

You have two possible options.

1) Short REIT ETFs. The following are the biggest Real Estate ETFs in the US market.

Vanguard Real Estate ETF (VNQ): This ETF aims to track the performance of the MSCI US Investable Market Real Estate 25/50 Index, which consists of stocks of publicly traded equity REITs and other real estate-related investments.
iShares U.S. Real Estate ETF (IYR): Managed by BlackRock, this ETF seeks to track the investment results of the Dow Jones U.S. Real Estate Index, composed of U.S. equities in the real estate sector.
Schwab U.S. REIT ETF (SCHH): This ETF from Charles Schwab follows the performance of the Dow Jones U.S. Select REIT Index, which includes real estate investment trusts (REITs) and real estate operating companies (REOCs).
Real Estate Select Sector SPDR Fund (XLRE): This ETF tracks the Real Estate Select Sector Index, which includes companies from the real estate industry within the S&P 500 Index.
iShares Residential and Multisector Real Estate ETF (REZ): Managed by BlackRock, this ETF focuses on residential and other types of real estate by tracking the FTSE NAREIT All Residential Capped Index.

2) Short various Dow Jones U.S. Real Estate Index futures on CME. These, however, are pretty illiquid, from what I know.

https://cmegroup.com/trading/real-estate.html

long · Dec 28, 2023

schizo said:
You have two possible options.

1) Short REIT ETFs. The following are the biggest Real Estate ETFs in the US market.

Vanguard Real Estate ETF (VNQ): This ETF aims to track the performance of the MSCI US Investable Market Real Estate 25/50 Index, which consists of stocks of publicly traded equity REITs and other real estate-related investments.

iShares U.S. Real Estate ETF (IYR): Managed by BlackRock, this ETF seeks to track the investment results of the Dow Jones U.S. Real Estate Index, composed of U.S. equities in the real estate sector.

Schwab U.S. REIT ETF (SCHH): This ETF from Charles Schwab follows the performance of the Dow Jones U.S. Select REIT Index, which includes real estate investment trusts (REITs) and real estate operating companies (REOCs).

Real Estate Select Sector SPDR Fund (XLRE): This ETF tracks the Real Estate Select Sector Index, which includes companies from the real estate industry within the S&P 500 Index.

iShares Residential and Multisector Real Estate ETF (REZ): Managed by BlackRock, this ETF focuses on residential and other types of real estate by tracking the FTSE NAREIT All Residential Capped Index.

2) Short various Dow Jones U.S. Real Estate Index futures on CME. These, however, are pretty illiquid, from what I know.

https://cmegroup.com/trading/real-estate.html

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I would be interested in the futures route more than shorting the ETF. A futures option would be even more attractive to me. Thanks for the suggestion.

nitrene · Dec 28, 2023

I don't know if they exist but there might be REITs that specifically buy farmland. Those would be perfect to short.

I know when the WFH narrative persisted that SL Green (SLG) & Vornado (VNO) were good shorts. They bottomed right after the SVB collapse. I guess if there is an actual credit crunch SLG & VNO will be good shorts again.

long · Dec 29, 2023

nitrene said:
I don't know if they exist but there might be REITs that specifically buy farmland. Those would be perfect to short.

I know when the WFH narrative persisted that SL Green (SLG) & Vornado (VNO) were good shorts. They bottomed right after the SVB collapse. I guess if there is an actual credit crunch SLG & VNO will be good shorts again.

I like how you’re thinking but it isn’t really farm land. It sounds like it’s prime development land (priced accordingly) on the edge of town that he wants to buy and hold as an investment. He will farm it while holding. He doesn’t have the free cash so he will be financing. His concern is a crash in development land prices, not farm land prices.

SunTrader · Dec 29, 2023

Seems he = you.

long · Dec 29, 2023

SunTrader said:
Seems he = you.

Yeah I’ve been getting that impression from some of the other posts here. I am not the OP in the other forum but I have my eye on a similar property and found his question very relevant. I’ve been thinking about it a lot for a few weeks.

murray t turtle · Dec 29, 2023

long said:
I’m leery of such a big operator in crypto. It’s so volatile that solvency problems are easy to imagine. I used them to buy my first BTC and the business comes across as a carnival. Lots of users accounts get locked for no reason. They have lottery giveaways (air drops) that encourage you to buy crypto. It’s the Wild West and I’m not interested in entering a long term deal associated with them even if it’s not crypto.

Also the markets listed probably wouldn’t correlate with rural property values. The scenario that started this thread would be a helluva black swan event that would definitely drop the SPX anyway.

%%
I dont really regret the occasional carnival, as a kid I never wasted much change on that anyway.
One reason RE makes so much money for so many, is most REALTORS have much higher standards a than a carnival barker .
And the Realtor is not trying penny + dime you to death even though they have a Very good comission LOL.I avoided wasting a lot of time with FSBO[for sale by owner]
Plenty of ways to manage risk in RE; if an auto is used + most do, liability + an auto insurance is cheap , especially for 6 months or 12 months......
[ LOL drop in value, loan due contract ,] that sounds like BAC or C , +or rocket up +rocket down RE market s, not very good stock prices also, so buyer beware

MarkBrown · Dec 29, 2023

long said:
Yeah I’ve been getting that impression from some of the other posts here. I am not the OP in the other forum but I have my eye on a similar property and found his question very relevant. I’ve been thinking about it a lot for a few weeks.

from someone that owned many commercial and residential properties, developer and owner of a national brand real estate franchise. having made more than lost on real estate, it was a total waste of time compared to trading.

whatever type of return you wish to make on a land deal is far eclipsed by what can be pulled out of the market with dependable reoccurring results.

murray t turtle · Dec 29, 2023

MarkBrown said:
from someone that owned many commercial and residential properties, developer and owner of a national brand real estate franchise. having made more than lost on real estate, it was a total waste of time compared to trading.

whatever type of return you wish to make on a land deal is far eclipsed by what can be pulled out of the market with dependable reoccurring results.

%%
MOST inVestors dont want land, seldom get rent + have to pay land taxes , even though some farmland gets taxed ,owner \green belt lower tax.
Average RE tends to do better than average stock fund;
but exceptional ETFs years could lift up ETF+ stocks average a lot.....................

nitrene · Dec 29, 2023

long said:
I like how you’re thinking but it isn’t really farm land. It sounds like it’s prime development land (priced accordingly) on the edge of town that he wants to buy and hold as an investment. He will farm it while holding. He doesn’t have the free cash so he will be financing. His concern is a crash in development land prices, not farm land prices.

FPI is the largest farmland REIT. Is "prime developement land" intended to become retail or industrial. There are retail & industrial REITs that might be useful just in case.

There are 17 different categories of REITs at least according to the TD Ameritrade screener.