Real estate investment trusts have pitfalls - SanTan Sun News SanTan Sun News

Real estate investment trusts have pitfalls

June 6th, 2021 development
Real estate investment trusts have pitfalls

By Dr. Harold Wong
Guest Writer

My column last month on the importance of knowing Social Security rules included a case study of how a long-term federal employee could have $75,680 total Social Security (SS) and federal pension income by knowing the rules instead of $47,760, or $27,920 less.

You can read this by going to and clicking the “Articles” link at the top of the home page.

Ever since the 2008 financial panic and stock market collapse, normal investment alternatives for retirement income are terrible. Here are the yields as of 5/24/2021: .10 percent to .50 percent for bank interest; 1.60 percent yield for US 10-year Treasury Bonds; 2.30 percent yield for US 30-year Treasury Bonds; and 2.02 percent average dividends for S&P 500 companies since Jan. 1, 2000.

Because of ridiculously low levels of interest rates, most people are taking way too much risk in the stock market.

When I see folks that qualify for their free strategy session, it’s not unusual that they have 80-95 percent of their life savings exposed to stock market risk. If the stock market has another major crash, they may never recover.

Note that during the 2000-2002 Dot-Com Crash and the 2008-2009 financial panic and real estate crash, the stock market dropped by about 50 percent.

In order to double or triple these terrible returns listed above, one has no choice but to explore alternative investments. These would include real estate investment formulas, private pensions, and solar business equipment leasing.

One could consider Real Estate Investment Trusts (REITs), which often specialize in different types of real estate. To maintain favorable tax status, they have to distribute 90 percent of earnings via a dividend to the securities owners.

Typically, investors purchase REITs for their dividends, which currently average more than double the dividends on S&P 500 companies and the 30-year Treasury bond.

Warning: The purchase of REITS is a security, much like owning a stock or mutual fund and you can lose principal.

On April 15, 2020, vs. one year previous, there were major losses in the REIT property indices due to the coronavirus pandemic. The sectors that declined were -15 percent for multifamily; -17 percent for office; -25 percent for health care; -48 percent for retail; and -53 percent for hotel.

In contrast, it was +34 percent for data centers; +31 percent for cell towers; and +14 percent for industrial. Source:

Note that one can often obtain higher and more stable returns by owning private real estate directly and not through a REIT.

Private pension funds operate like Social Security or any other pension. The longer you wait to trigger your retirement income, the more you get.

A nurse was age 62 in 2014 and deposited $270,000 in a private pension. When she triggers her retirement income at age 70, she will receive $27,000 per year guaranteed for life. That’s a 10 percent rate of cash flow.

Solar business equipment leasing, allows investors to be part of the massive push by government for “The New Green Deal” and a cleaner environment. Cash flows can average 5-7 percent annually.

However, one must also add the tax savings. If one buys $100,000 of solar equipment that is leased to businesses, there’s a 26 percent tax credit and a potential $87,000 immediate deduction by using Section 179 of the tax code.

It’s not unusual that high-income taxpayers will save $50,000 in tax, which doubles the tax-adjusted rate of return and reduces their total personal tax bill.

Free live seminars and lunch: 10:45 a.m. June 12 at The Old Spaghetti Factory, 3155 W. Chandler Blvd. #9, Chandler; and 10: 30 a.m. June 13 at The Hyatt Place 3535 W. Chandler Blvd.

Topic is “Double Your Social Security & Other Retirement Income and Pay No Tax!”

To RSVP, please contact Dr. Harold Wong at 480-706-0177 or His website is

Dr. Harold Wong earned his Ph.D. in economics at University of California/Berkeley and has appeared on over 400 TV/radio programs.

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