2020’s Best Way to Play Real Estate
Interest rates were easily the biggest investment story of 2019.
And they’ve set up several industries for incredible profits in 2020.
Yes, I know some analysts are worried that we’ll start to see signs of an upcoming recession.
I don’t completely agree, but I respect the research behind those predictions.
Even if they’re right, however, there will always be industries, sectors and individual companies that do well while everything else tumbles around them.
Some will also continue to pay dividends… regular income you earn just by owning the company’s stock shares.
So today, I’d like to tell you about a class of investments that will continue to benefit from this low interest rate environment… and could also help protect your portfolio in the event of a downturn.
Here’s what you need to know…
The Real Estate Investments for the Rest of Us
Last year, the Federal Reserve reversed its position on interest rates — announcing three cuts in a row.
Those lower rates are great news for real estate investment trusts (REITs).
These trusts were created to encourage investments in massive real estate projects… and to give as many people as possible a chance to participate in those ventures.
The encouragement comes from the fact that REITs don’t pay any taxes on their income. They can make all the money they want without sending a single cent to Uncle Sam.
That allows them to generate bigger profits than companies that are hit with income taxes.
But in exchange, REITs must pay at least 90% of their income to shareholders each year.
So if you buy REIT shares, you’ll receive an income payment every three months for every share you own.
The shares of REITs can also gain value themselves.
In other words, you can buy the shares at a low price… and have a chance to sell them for a profit down the road.
And in 2020, REITs’ dividends — and share prices — should reach new heights… all thanks to lower interest rates.
First, the low rates make it easier for REITs to add new properties to their portfolios — which help generate new revenue streams.
The more money they make, the more they will send to you.
And that’s not all…
Low interest rates also mean things like checking, savings and money market accounts don’t pay very much these days.
So investors and institutions that need steady, regular income will have to put their cash somewhere that does offer good payouts.
REITs fit those requirements perfectly — and the increased demand for REIT shares will naturally push their prices higher.
It’s a one-two combination for your portfolio.
If you don’t currently own any REITs, let me tell you how to get started…
Start Your REIT Search
One of the best places to look for REITs to buy is at the National Association of Real Estate Investment Trusts (Nareit) website, www.reit.com.
Nareit is a worldwide leader in REIT research and tracks almost 200 REITs that you can choose from.
Once you visit the site, the first decision you’ll need to make is what sector you’re interested in.
Some of your options are residential, industrial, retail, health care, data center and diversified REITs.
I recommend diversified REITs because they specialize in a wide variety of properties, meaning you’re not tied to a specific part of the real estate market.
However, if you choose to go with a specific sector, choose it with care. And once you have a few names to consider, it’s time to do some digging.
Take a look at the REIT’s homepage. Look at the properties in its portfolio. And pay special attention to where the REIT makes its money.
For example, a REIT that rents a large volume of its properties to struggling retailers probably isn’t the best move for your hard-earned money. While on the other hand, data center REITs that are housing the technology to fuel the 5G revolution could be an excellent long-term investment.
This step is critical because after all, where the REIT generates its income flow is where you’ll get yours.
Best of all, of the almost 200 REITs tracked by reit.com, only a few cost more than $100 per share.
So you can easily earn a stake in a wide range of impressive properties for less than a hundred bucks!
I’ll continue tracking the tailwinds pushing REITs higher. But for now just know that low interest rates and fears of a pullback make REITs an ideal investment for any well-balanced portfolio.
Here’s to growing and protecting your wealth!