Copyright © 2020 · All Rights Reserved · Jerry Novack | Bluerock Real Estate
Posted on February 18, 2018
The ebbs and flows of the investment world often advertise apparent risks, but also rewards. The middle ground that exists between volatility and total interest rate returns is, after all, real estate.
According to collaborative research published by Deutsche Bundesbank, University of Bonn, and the University of California-Davis, the housing market manages to deliver a return of 7.05 percent, which is a higher percentage than the gains seen when looking at stocks (6.89 percent) or bonds (2.5 percent). The researchers reviewed economic exchanges of 16 now-wealthy nations, examining wealth growth from 1870 to 2015, and they discovered that housing investment carried just half the risk of stock investment.
The above-average returns and stability granted to this market is something that many experts have approximated by measuring gains, but findings hardened this notion. Real estate investment is more attractive, lucrative, and stable, but owning individual rental properties, whether commercial or residential, can pose a challenge for many investors. With that in mind, many to place their funds behind a real estate investment trust (REIT), which is essentially a more straightforward way of benefitting from property investments. The trusts are particularly attractive to those who are aware of the dynamic risk and return nature of real estate investment trusts.
An important thing to consider when investing in REITs is the fact that tax reform is advantageous for those involved in real estate. New changes in the law directly impact REITs. There will be greater deductions for instance. REITs can opt out of the rule applied to most taxpayers who aren’t allowed to deduct business interest expenses beyond 30 percent of earnings, ahead of amortization, depreciation, taxes, and interest. There are even more benefits, as REITs are the only investment opportunity that is still able to benefit from the full deductibility of interest. The most well-vetted REITs stand out as an opportunity for profit.
The National Association of Real Estate Investment Trusts’ 2018 REIT Outlook indicated that REITs were undervalued and overlooked last year. That was the case even though it saw the return of 9.27 percent. Ongoingly, REITs present a greater opportunity than stocks might, as their or REITs with a higher yield and flowing interest rates.
There’s a dissenting correlation between stock returns and REIT returns. A significant takeaway is that only individual REITs are marked for growth. Some REITs outgrow others, and those larger-cap REITs are positioned to perform better, often driven by demographic trends. The underlying assets of a REIT determine returns.