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Experts say equity REITs will thrive in new sector

Real estate investors in California and throughout the country may be poised for a change as equity real estate investment trusts are moving into a separate real estate sector rather than being lumped in with the financials sector. This move does not apply to mortgage REITs. Already a higher-risk investment, mortgage REITs may continue to be riskier than equity REITs in part because the latter will no longer be tied to the performance of the more volatile financials sector.

Conversely, equity REITs are likely to perform better without the influence of the financials sector. Equity REITs are already growing in popularity, and this is one of the main reasons for the separation. Equity REITs tend to be stable in their growth, and this is expected to continue. However, some REIT holdings in financial exchange-traded funds will have to be sold. This means that some investors with assets in ETFs could see a drop in dividends.

In general, the move is expected to drive up interest in real estate among investors. With crowdfunding a growing way to invest in real estate, it is likely that new investors will continue to flock to this sector.

Many people may see real estate as a solid investment and a good sector to start investing in, but both novice and experienced investors might want to work with an attorney throughout the process. Even a reasonably trouble-free real estate purchase is likely to include some complexities, and there might be other issues along the way to deal with either as part of the initial purchase or during ownership ranging from breach of contract to easements to lease disputes.

Source: Forbes, "New Real Estate Sector Underscores Value of Equity REITs," Nav Athwal, Sept. 1, 2016

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