Real Estate Investment Trusts (REITs) fully participated in the 2022 bear market. Unlike the tech sector’s apparent recovery during the first quarter of 2023, REIT share prices have not shown signs of life.
Broadly speaking, REITs are down about 30% from the late 2021 highs.
That means now is a good time to make some selective REIT investments.
REITs operate under special rules and tax considerations. An REIT owns commercial real estate. The REIT does not pay corporate income tax as long as it pays out 90% of net income as dividends to shareholders. Individual REITs focus on specific types of commercial properties. Here are some of the categories.
- Office buildings
- Hotels and lodging
- Apartment complexes
- Single-family rentals
- Industrial properties
- Self-storage
- Retail
- Shopping centers
- Healthcare properties
- Data centers
- Cell towers
Each sector comes with its own economic potential and challenges. For example, office REITs face challenging times as work from home policies remain in place, and companies are looking to downsize the amount of office space they lease. On the flip side, healthcare and self-storage REITs are mostly immune to the swings in the economy.
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