Home Most Popular Seize the Opportunity: Why Now is the Time to Invest in REITs

Seize the Opportunity: Why Now is the Time to Invest in REITs

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Seize the Opportunity: Why Now is the Time to Invest in REITs

As the saying goes, “Make hay while the sun shines.” And in the world of investing, the sun is shining on real estate investment trusts (REITs) right now.

Despite recent market downturns, I firmly believe that REITs present a valuable opportunity for investors. Let’s take a closer look at why the time is ripe to invest in this sector.

The Federal Reserve Factor

In recent months, macroeconomic headwinds have caused REIT valuations to decline. However, these headwinds have not diminished the strong fundamentals of REITs. Additionally, history reveals that the best entry points for REIT investments tend to occur during early-cycle recoveries. With that in mind, it’s worth considering the potential for future growth in the REIT market.

While questions remain about the Federal Reserve’s stance on interest rate hikes, recent indications suggest a pause in rate increases. Chair Jerome Powell has highlighted the positive impact of long-term Treasury yields and signaled a potential end to rate hikes. This shift could lead to tightened financial conditions, creating favorable circumstances for REIT investments.

Of course, there is still the possibility of surprises when the Fed’s next meeting concludes. However, the data would need to significantly change to push the Fed towards further rate hikes.

When Will the Sun Shine Again in REIT-Dom?

Historically, REITs have delivered above-average returns towards the end of rate-hiking cycles. Analysts from Cohen & Steers predict that listed REITs’ recent decline in private real estate property prices indicates positive returns over the next 12 months.

For example, September 2023 saw a 7% decline in REITs, marking the third-worst September performance since 1995. Moreover, as of October 23rd, returns fell by around 5%. While these numbers seem discouraging, they present an opportunity for value investors. With valuations at levels last seen 7-10 years ago, the REIT sector appears attractive for long-term gains.

It’s important to remember that REITs should be approached as long-term investments. Short-term market fluctuations can create buying opportunities for patient investors seeking to reap the benefits of these unique assets.

Investment Opportunities: Our Top 3 REITs Picks

Now that we’ve established the potential for growth in the REIT market, let’s explore three of our favorite REITs:

VICI Properties (VICI)

VICI Properties is a triple-net real estate investment trust that focuses on experiential properties such as gaming, hospitality, and entertainment destinations. With a diverse portfolio of iconic properties, VICI Properties leverages long-term lease agreements with strong tenants, including Caesars Palace and MGM Grand.

Alexandria Real Estate (ARE)

Alexandria Real Estate specializes in Class A/A+ life science properties located in innovation cluster locations. With a focus on the biotech and pharmaceutical industry, Alexandria Real Estate benefits from long-term lease agreements with leading companies and academic institutions.

American Tower (AMT)

American Tower is a global leader in communications infrastructure, with a portfolio of cell towers and other communications real estate. As wireless service providers and television broadcast companies rely on their infrastructure, American Tower enjoys steady rental income and opportunities for future growth.

All three REITs mentioned above possess strong fundamentals, investment-grade balance sheets, and historical growth rates that make them attractive investments in the current market climate.

I’m No Weatherman, but I Know a Good Investment Opportunity

You might be thinking, “How can Brad predict when the sun will shine in REIT-dom? He’s no weatherman.” That’s true, I’m not a weatherman. Instead, I like to think of myself as a REIT farmer, planting high-quality seeds that have the potential to grow into everlasting gobstoppers.

Investing in REITs at the right time can lead to substantial long-term gains. So, instead of waiting for the perfect conditions, seize the opportunity now and invest in the promising world of REITs.

As Frank Sinatra once sang, “The best is yet to come.” So, let’s make the best investment choices and watch our portfolios flourish.

Happy SWAN investing!