Since Barack Obama got in office real estate investments had a place in the top profitable investments.
22 May 2015 – CNN
No, we’re not talking about regular people’s homes. The biggest gains have come from so-called real estate investment trusts — REITs for short.
REITs are companies that own a lot of different properties. Some REITs specialize in just one type of real estate (think apartments in California) while others own a bunch of different kinds of property such as hospitals, office buildings and malls. They make their money much like any landlord does — by collecting rent.
nvestors have gobbled up REITs since 2009 for three reasons:
1) REITs trade like stocks. REITs give you real estate exposure a lot easier than having to buy and sell actual buildings. It’s good for diversification, which is why sophisticated investors usually have about 5% or less of their portfolio in REITs.
2) REITs win big with an economic recovery. The financial crisis that triggered the Great Recession was caused largely by mortgages gone bad. That caused real estate prices to plunge. But when the economy started recovering, real estate (especially office space and urban apartments) bounced back. REITs benefited big time.
3) REITs have high dividends. Quite a few investors, especially retirees, like to have steady income from their investments. Normally they buy bonds to get that income, but the yields on bonds have been incredibly low — think 2% to 2.5% on U.S. government bonds. REITs, meanwhile, have been returning about 4% to 6% a year in dividends.
Investors have been substituting REITs in their portfolios for bonds. It’s been a shrewd move. People have received steady dividend payments while the underlying asset has risen in value nearly as much as stocks.
One look at the S&P Global REIT chart shows nearly 140% of returns since March of 2009.