Real estate investment trusts (REITs) have upheld their reputation as excellent portfolio diversifiers as the real estate market continues to climb. And like any income-generating Real estate investment trusts (REITs) continue as an attractive investment opportunity, even despite the worsening economic threats related to the pandemic and its aftereffects. Established by Congress in 1960, as a method to permit individuals to invest in income-producing real estate without actually buying property, REITs are almost always in a balanced investment portfolio. But as near the final months of 2021, where do they stand now? What do you need to know as an investor, or even as a director or officer of a REIT? Weed Ross is here again to save the day, but instead of a cape, we usually just wear collared shirts.
Below, we dive into the nitty gritty of REITs and insurance for REITs, so that you don’t have to scavenge the internet, Below, the experts at Weed Ross have put together four key things to know about REITs. We will examine the market and which types of REITs are performing well, most notably, single-family residence (SFR) REITs. And lastly, we’ll explore the importance and details behind insurance for REITs.
In this article, we will cover the following four points:
- REITs Offer Strong Long-Term Performance
- REITs Demonstrate Great Potential Post-Pandemic
- SFR REITs Lead the Way
- REITs Need Comprehensive Insurance
REITs Offer Strong Long-Term Performance
Historically, REITs produce quality returns, and are appealing to investors for exactly this reason. For example, publicly traded REITs in the United States have outperformed the S&P 500 over the last 30 years, with an average annualized return of about 11%. In 2020 alone, equity REIT returns hovered closer to 15%. Additionally, REITs offer an average dividend yield of around 4%, which is more than double the average stock dividend in the S&P 500. But because REITs tend to remain unaffiliated with other market influencers, they are also an excellent portfolio diversification tool.
REITs Demonstrate Great Potential Post-Pandemic
The pandemic forced many investors and real estate experts to look closely at REITs, and consider whether or not allocating to REITs still made sense. While the return to office spaces may be slow, due to the comfort and potential new normals, REITs come in various shapes and sizes. SFR REITs, for instance, are becoming increasingly popular because more and more renters have opted to move out of high-cost cities to suburban apartments and homes. And as vaccinations continue and we return to normal, more and more people will want to live closer to their offices and enjoy easy access to nightlife and other draws of urban life. This transition will push commercial REITs back up, presenting a valuable opportunity for investors.
SFR REITs Lead the Way
Until we do return to normal, SFR REITs are leading the charge as one of the top-performing property sectors over the last calendar year. During the pandemic, lockdown policies tanked several high-density rental markets, such as in New York City, San Francisco, and Los Angeles, which caused suburbs to become a hotter market than ever before. REITs that focus on single family rentals and residences saw outstanding returns, and were even trending upward before the threat of COVID-19. Additionally, REITs have even tapped into iBuying platforms, with direct investment opportunities with companies like Zillow, Opendoor, and Redfin, to name a few examples. For these reasons, many market experts expect SFR REITs to remain resilient and profitable.
REITs Need Comprehensive Insurance
When it comes to REITs, insurance is a significantly less talked about topic. Insurance for REITs covers a variety of potential risks, because like all investment opportunities, REITs must be protected against liabilities. REITs face a variety of major risks on a daily basis, including data breaches, general liability, property damage, management liability, and more. Keep in mind, REITs are handling a substantial collection of properties, all of which could have their own individual issues or incidents. But basic landlord insurance or business insurance doesn’t cover it. As a director or officer, it is imperative that you consider the benefits of comprehensive insurance for REITs.
Weed Ross is a local insurance agency, and we pride ourselves on offering the industry’s best insurance packages for any and all scenarios. We work with a vast number of carriers, so you don’t need to spend hours researching and comparing—we will handle that for you. Our extensive experience includes a myriad of different insurance types, from homeowners insurance, to business insurance, to landlord insurance, and more. Weed Ross is here to make things simple and straightforward. If you still have questions regarding insurance for REITs, contact us today!