Investors Doing Well – REITs Not So Much

A recent article over at NuWire.com speaks to the relatively poor performance of REITs, Real Estate Investment Trusts, in 2013. Actually, the article cites a report that shows real estate funds that invest in mainly commercial REITs have not done very well recently.
Real estate ranked as one of the worst performing categories of 2013. In 2013, the S&P 500 returned around 32 percent while real estate funds gained only 1.6 percent according to Morningstar. Rising mortgage and interest rates have contributed to the situation. Dividend-rich sectors generally suffer in rising rate markets. As bond yields improve, dividend stocks are sold and investors move into bonds.
Some analysts are predicting a probable improvement in REIT and real estate funds performance in 2014. They cite an inventory growing only 0.6 percent, while demand for commercial space improved by 2.5%. Supply and demand waits for nothing, and this imbalance could signal better returns from REITs and real estate funds. However, even if they improve, they’ve not been very attractive of late, and there could be an opportunity for the investor here.
Real estate wholesalers who work with rental property investors may be able to use this information in conversations with conservative investors considering real estate. Many of them invest in REITs as a passive way to get into real estate, and they think that they’re getting experts to handle the active part for them. Unfortunately, that hasn’t been going well for them. Though this article is mostly about commercial real estate, residential REITs and funds haven’t done that well either recently.
Perhaps you can even offer to speak to a local group about rental property investment and going active for higher profits. The idea would be to illustrate to the attendees that double-digit returns are the norm for rental single family and multi-family investors. You would also be able to give them instruction in the basics of landlording and show them that it’s not as scary as they may think. Team up with your accountant to get them excited about the tax advantages too.