REITs and the Real Estate Market

August 27th, 2010 · 4 Comments · REIT

House of Cards

House of Cards

I just wrote a post over at Million Dollar Journey called The Downside of Owning REITs Everyone has already been told I’m not a psychic liar and I can’t predict the future.

I’m worried because I’m thinking of Grandma owning a whack of REIT’s with 10-14% returns in today’s market trying to make up for the loss of a huge chunk of her retirement savings in the stock market in 2008.

I’m worried because of all the people who tell me “I can’t find an income property with a good return, I’ll just buy a REIT”

All in all, if the residential real estate market goes nutty in a downward swoop like it started to do in ’08, Grandma won’t be happy with her REITs anymore.

It’ll be like owning shares in the Asbestos Bulimia Company. No one wants it cause it’s got the wrong name. Something decent becomes as popular as Milli Vanilli.  So if you’re sitting on a bunch of REITs you might want to balance your portfolio.

I don’t count myself among the real estate bears usually but I feel like we’re on a bit of a cliff with this real estate market and I’m not sure which way we’re headed. It looks like down to me on some days then a glimmer of hope. It’s too erratic for Grandma that’s for sure!

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4 Comments so far ↓

  • Real Estate

    Keep in mind, this was the average time it took to sell a home including the run down messes.

  • Jordan

    Diversification is always important — most sane people would not argue about that. But it’s probably also important to mention (and correct me if I am wrong) that REITs include commercial properties as well as residential mortgages or properties, and that the residential and commercial housing cycles are not always synchronized. So a REIT may not necessarily suffer as badly as house prices in a down market.

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