Investing in REIT

[Jason Haynes]

I found a REIT about a year ago and have been collecting on it every month since. The stock is PSEC (Prospect Capital) and it pays dividends monthly , over 13% yearly. The thing that's nice about the monthly dividends is you're not so worried about the actual stock price. It can go up or down and the returns have been consistant. 

I've been interested and investing in Real Estate for awhile, and I've found this to be a profitable vehicle while I find my next deal. For those of you that want to be a part of the Real Estate movement, but don't know where to start - this might be something to tid you over. I am in no way suggesting that you invest, but it's been working for me and I just wanted to pass it along. If anyone else has any good REITs that have been working for them, I would love to hear. Good luck!

[Michael Seeker]

@Jason Haynes - There are a lot of good REITs that exist, however buying a stock based on yield alone is a recipe for disaster.

Prospect Capital is not a REIT, it is a BDC.  There is a big difference and the fact that you're calling it a REIT means you probably don't know enough about the company to be invested in it.  BDCs (and REITs) are strongly affected by changes in interest rates.  As rates rise, profits and stock valuations tend to fall.  We're in an environment where rates are almost certainly not going down...so that's not a good sign for these types of investments.

A perfect example of what could go wrong with a mid to high yielding stock is with Kinder Morgan (KMI).  This is an oil pipeline company that had good yields, followed by GREAT yields, followed by no yield, followed by minuscule yield.  Meanwhile the market price of the stock went from low $40's down to the low teens.  If you were invested in the stock and banking on the dividend, you lost the dividend and you lost over 50% of your invested capital.

I'm not saying PSEC is a bad investment, but you should really learn a heck of a lot more about what it is you're investing in and understand the possible risks and rewards.  The same basic principles apply to investing in real estate.