VA Homeowner

Time to Invest in REITs?

can't agree with you here... residential REITs face significant headwinds in 2009 and 2010. While it is true that you will see REITs increase their occupancy, this will happen at the expense of rental rates, i.e. rental revenue will go down in the near term. Unemployment is one of the single biggest drivers for REITs and with the unemployment rate expected to go up to 9%, this can only lead to higher delinquencies and vacancies.

Additionally, IRS recently made changes to allow REITs to pay dividends out in additional shares. This would presumably allow the REIT to conserve capital, but would also dilute shares. The major (and well-capitalized) REITs have committed to continuing dividend payments in cash but I seriously doubt this will be the case for all of them. As you referenced Apartment Investment & Management (AIMCO), they recently cut their dividend in a bid to conserve cash for upcoming debt payments.

Finally, real estate values may still have room to go down, especially for apartment buildings and communities. Can you realistically say that any building bought within the past 3-4 years is worth more today than at purchase price? Investment in REITs have had a proven track record but I would wait a bit longer before jumping in...

REITs That Have Stopped Dead in Their Tracks

Its not just the big players. Who was it that said "you'll see more and more development companies with an operating portfolio transition to operating companies with a development capacity..."