Q: Gerald, I want to invest in real estate without managing property. What do you think about investing in a REIT? Kwame’, Bowie, MD A: REITs were modeled after mutual funds. REITs buy, own and manage real estate and the main benefit is that REITs give individual investors a convenient way to invest in real estate passively. However, there 2 big dangers investing in REITs that include: 1. RECESSION VULNERABILITY REITs are highly vulnerable to recessions because publicly traded REITs are highly correlated to the stock market. Market recessions normally lead to a drop in REIT prices. REITs are susceptible to market shocks because REITs don’t have the flexibility to retain cash. Without liquidity, it’s difficult to weather market downturns. […]
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