REITS and future interest.

[amarowsky]

I don't feel that I am as exposed to real estate in my investments, so I started doing some Reit research. And was hoping for some more input from everyone.

It seems that there are 3 styles of REITs, equity (holdings that correct rent/leases from offices, commercial, and industrial properties), mortgage (those that generate income from home sales and mortgages), and hybrid (mix if the two).

REITs have had great returns for the past few years and seem like good income based investments, they seem to have much lower ceilings but much higher floors than many stocks or mutual funds. However with the interest rates poised to rise I have read That it will effect the earnings on future REITs. I can understand this because with higher interest rates, people may not be buying as many homes.

My question would be, would higher interest rates make equity rates more attractive? It seems that the option for companies to lease or rent would be more prudent then buying at higher interest. So an equity REIT may excel where mortgage based REIT would be impacted negatively. Does this seem accurate? Some reading seems to agree, just like peoples thoughts.

[amarowsky]

Also I noticed many REIT market value are down, but they earnings seem to be constant. Making them appear attractive considering this market correction.

[corn18]

I can't answer annoys your specific questions but I did jump into Realty Income Corp [O] just for the dividends. 4.81% isn't too shabby. It sits in my Roth IRA so it is tax efficient. That is the extent of my knowledge on REITs.

Tom

[amarowsky]

According to the speculations and the Luke warm earnings being reported so far, that the fed won't be doing any rate hikes immediately. I would imagine a quarter point raise within the next 6 months. Although some of the pod cast opinions I've heard think it may not go any higher than that all the way through 2016.

I still chose equity based reits to be the flag ships of my real estate diversification. And they have already paid some earnings in addition to a nice bump in market value. I chose two different companies that has the best ratings , track records, and holdings for what I was looking for.

I have felt a lot easier regarding my investments in heavy income based gains, rather than equity ones. Slow and steady feels a lot more comforting than the volatile roller coaster of individual stocks during this correction.

[GrimJack]

I chose WSR - it is small office space leasing company with only a couple million sq ft of office space but er it actually bought more space - when I bought in it only had TX property (it now has property in AZ and IL). Anyway, it pays about 9% dividend but on a monthly rather than quarterly schedule (not sure if this is common with REITs or not)
I am happy with it - it will probably not be a double bagger for me but 'slow and steady,,,' it will double in value in 8 years (using the rule of 72). I have about 400 shares now and bought in with 345 shares on 2/27/14 - that works out to about 9% per year.