Is Now a Good Time to Invest in a REIT?
A REIT is a Real Estate Investment Trust. They simply put, do the investing of real estate for you. Managed by experts, they buy properties, manage them, buy mortgages, and hold them for extended periods of time. Like a stock, the price of a REIT goes up and down as the value of their holdings change. You can purchase a REIT through a stockbroker paying normal commissions or if you are an active trader can do so yourself through online sites (ie..Scottrade).
With real estate holdings and values lower today than they have been for many years, now may be the time for some to consider this approach. While I am not suggesting to go out and buy stock in REITs, I'm simply implying that in a buyers market, if you can find an aggressive and financially sound REIT, they like investors may be buying some great properties during this down market which over time could lead to a profit when the market rebounds.
There are many types but your best bet for one to offer steady growth over the long term and dividends would be Equity REITS. They buy apartment buildings, hotels, shopping centers and office buildings. Some specialize in certain parts of the country while others are very diversified. Some invest in developers deals, and others buy and develop and manage properties themselves. In general, those that do their own developing and managing are usually the most profitable.
Over short term most will behave like stocks, rising and falling with the market. Over the long term however they usually trend towards following what the real estate market is doing. So if long term values rise, REITS should as well.
To find out more about a REIT, get the companys annual report. Find out how its doing, what its been investing in and its investing philosophy. What is the stocks history and what type of dividend pay outs do they offer? Are the dividends growing? Most importantly is the dividend being covered by cash from the operations of the business or more investors buying the stock, or selling properties? In general, you should stick with some of the larger more accomplished and actively traded REITS that are listed on the major exchanges. This can be done by doing some research or contacting a trusted financial advisor or broker that may have experience with the stock market.
Hope you find this article helpful and as always, please forward to anyone that may benefit from it as well. I look forward to any comments, questions or thoughts on the above!