Investment Property: Time To Invest?

Investment property opportunities in rentals and REITs

After years of record low interest rates and seemingly risk-free investment, the U.S. investment property market is headed for murkier times. The question "Is it a good time to purchase investment properties?" has been replaced by "Will the U.S. housing market correction be a hard landing or a soft landing?" But there are always opportunities for smart real estate investors, and right now, those opportunities are in commercial investment properties, apartment buildings, and real estate investment trusts (REITs).

Why investment properties just got riskier (and how you can benefit)

Sales of new homes have dropped precipitously over the past year, and the year ahead holds no indication that this trend will abate. In fact, it's likely to worsen. Bloomberg reports that along with higher mortgage rates, which are discouraging investment property financing, there is a greater glut of unsold investment properties now than in the last 10 years. Many market analysts are predicting a housing recession. Simply put, it's probably not a good time to buy a house.

So what's a buyer of investment properties to do? An overlooked fact in all this investment property doom and gloom is that people have to live somewhere. And if they're not buying houses, they're renting apartments. Apartment vacancy rates across the U.S. are lower than they've been in five years, and because of the condo conversion craze that accompanied the housing boom, the demand for rental units remains high.

REITs are a more conservative way to tap into this investment property trend. An REIT is a trust or corporation that purchases and manages investment properties using investor capital. Investing in an REIT is not quite the same as investing in rental properties. It's more like a mutual fund. There are over 200 REITs in the U.S., most of them equity REITs, meaning their revenue comes from property rentals. Take some time to research and compare REIT rankings before you invest, but we recommend a look at Archstone-Smith and AvalonBay.

More information on investment property