When a real estate company goes belly up, it’s time to sell – Investopedia
Investopi has released a comprehensive guide to the world of real estate investment trusts (REITs).
In a post titled “Why is real estate investing a bubble?”, the website highlights several reasons why REITs have gone bust.
It notes that a recent analysis by investment banking firm Fitch Ratings revealed that REIT assets are now worth about $3.4 trillion.
That figure includes $2.4 billion in stocks, $1.5 billion in bonds, and $1 billion in real estate assets.
According to Fitch, the REIT industry is currently worth about 10% of the world’s economy, but the average US property investor owns just 1% of its value.
Investopedia also points out that REITS have a number of major problems.
The real estate sector in particular has been plagued by debt and high fees, as well as a large number of poor returns and long periods of high unemployment.
REIT investors are also often poorly managed, as they often have no incentive to sell their property at any given time.
Accordingly, they’re very likely to have trouble recouping the money they invested in their REIT.
According To Investopoe, the financials for the largest REIT companies in the United States have fallen by about 20% in the past three years.
InvestOpedia also highlights that many REIT investments are now in poor condition.
Many investors simply don’t want to keep owning a property and are simply selling it off to make more money, which can result in losses.
In addition, there are concerns about the health of the REET market.
Investopian points out in its guide that the average age of REIT investors is over 50, which is often far higher than the average retirement age of 50.
Investopi also points to the fact that the majority of REITS are owned by foreign investors, which means that they often do not have a local government presence and may not have the local infrastructure to support their businesses.
The lack of local government support can also mean that the business is subject to high taxes, which in turn can lead to the potential for losses.
According Investopica, many REETs are now “highly leveraged” with extremely high interest rates, which makes them extremely risky investments.
The firm also highlights the fact the average annual return for REIT-type businesses has fallen from 9% in 2000 to just 3.5% today.
This, in turn, has made it increasingly difficult for Americans to save for retirement.
In addition to the financial woes, Investopie also cites several other factors that make REIT stocks risky.
For example, the real estate industry is highly regulated, meaning that investors are required to comply with the laws and regulations of the states in which they live.
And there are strict regulations regarding what kinds of mortgages can be taken out, which could mean that those investing in REIT stock could end up paying higher interest rates than their counterparts in other sectors.
As such, investors are more likely to be saddled with high mortgage debt and are more prone to losing their homes.
Additionally, a number in the real property sector have been forced to sell assets as the REETS have struggled to make profits.
All of this means that investors can be at higher risk for default and financial problems if they invest in REET stocks.
Overall, Investopian notes that there is a huge opportunity for investors in REETS to make money from real estate investments, but investors should be wary.
If you want to learn more about real estate and investing, be sure to check out Investopius Guide to Real Estate Investing.
Get all the latest real estate news right here.