Investing in real estate is a great way to accumulate a lot of wealth — especially if you’re willing to be patient. But right now, the housing market is downright berserk.
Not only are home values up across the board, but mortgage rates are also at their most expensive level in over a decade. That means it’s a really tough time to scoop up income properties or find affordable homes that can be renovated and flipped at a profit.
The good news, though, is that you don’t have to go out and purchase a home to become a real estate investor. In fact, there’s an easier way to get in on the real estate action at a time when it’s become so impossibly difficult to buy property.
Look to REITs instead
Now is certainly not a good time to buy a home. But it’s a great time to invest in REITs (real estate investment trusts).
REITs are companies that own and operate different types of properties. Within the realm of REITs, there are different sectors you can choose to focus on. And now’s a good time to get into REITs for a couple of reasons.
First, the stock market has been extremely volatile, and a lot of people’s portfolios are down significantly year to date. The upside of owning REITs is that they tend to pay higher dividends than your average stock (namely, because they have special dividend payment requirements). And those dividend payments could help offset other losses you might be seeing.
Also, right now, stock values are down across the board. That means you may have an opportunity to scoop up certain REIT shares on the relative cheap.
Which REITs are a good buy today?
The specific types of REITs you buy should hinge on your investing strategy. But generally speaking, now may be a good time to look at industrial real estate.
The pandemic has caused a major shift in the way consumers shop. Now a lot of people are more apt to make purchases online, and that’s caused an uptick in demand for industrial space (think warehouses, fulfillment centers, and the like). That makes companies that operate industrial space a solid bet.
You may also want to focus on REITs that are well positioned to withstand a period of economic distress — something some experts are warning of. In that regard, healthcare REITs are a good option, because even in the worst of times, people will always have medical issues to contend with.
There’s no need to sit on the sidelines
It may be a difficult time to start purchasing income properties or rehabbing homes. But that doesn’t mean it’s a bad time to become a real estate investor.
Because the stock market has been so volatile, REITs may actually serve as a source of income security in your portfolio thanks to those generous dividend payments. And if you’re able to snag some REIT shares at a discount due to general market turbulence, it pays to go for it.
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