Real estate investments trusts (REITs) have the potential to give investors monthly income to get an added dose of yield to hedge inflation, which is almost imperative in the current market environment. A combination of monthly distributions and price appreciation in a rising real estate market can open up these types of opportunities.
“REITs are organized to pay out most of their taxable income to investors in the form of dividends,” a Yahoo! Finance article explained. “Since they’re often able to raise rents on owned properties, many have the means to keep up with, or sometimes to beat, inflation.”
Real estate market analysts all have different views of where the sector could be heading, as rising interest rates have been making buyers think twice despite prices starting to ease after upward pressure since the start of the pandemic. Still, others say a super cycle in real estate could be underway as prices could keep on rising, forcing the market to become heavily reliant on rental income.
Of course, this doesn’t hurt the real estate investing market, particularly REITs that derive the majority of their income from rentals. Even with analysts forecasting the tricky real estate market to slow down REITs, positive growth is still to be expected.
“The likelihood of a tenant going bankrupt is probably less,” said Michael Souers, director at S&P and a lead analyst in the real estate sector. “The impact will probably be more muted than the global financial crisis in terms of rent decline or same-store (net operating income).”
Get Global Real Estate Exposure
To capture this growth, one fund to consider is the Virtus Duff & Phelps Global Real Estate Securities Fund. The fund seeks attractive long-term returns by providing global real estate securities exposure, emphasizing companies with revenues driven by recurring rental income.
The highly experienced portfolio team applies a disciplined, bottom-up investment process, utilizing both qualitative and quantitative factors, focusing on high-quality commercial real estate owner/operators. This takes all the guesswork out of having investors do all the research themselves to pick individual stocks to get global real estate exposure.
Features of the fund per its product website:
- Attractive income and growth potential: Pursues the stable cash flows offered by contractual rental revenues, emphasizing REITs with strong management teams focused on long-term value creation.
- Broadens portfolio diversification: Provides exposure to the lower correlations that the global real estate market has historically exhibited to traditional stocks and bonds.
- Lower volatility approach: High-conviction, lower-turnover portfolio of 50-70 securities strives to benefit from valuation inefficiencies and the historically higher long-term risk-adjusted returns of rental property companies over non-rental companies.
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