As we approach the year 2024, investors are anew adapting their strategies to navigate the ever-evolving landscape of the financial markets. From the oomph of tech companies, a volatile commodities market, to shifting interest rates – capital markets seemingly never sleep.
“The current market conditions require meticulous strategy planning. Investors need to be cognizant of the different financial instruments available to them. Diversifying their portfolio in a manner that mitigates risk and maximizes return is paramount today,”
Catherine Simmons, a seasoned financial analyst.
In this regard, Real Estate Investment Trusts (REITs) are becoming increasingly significant for market diversification. Here’s why:
The Appeal of REITs in Today’s Complex Market
The global economic landscape is known for its complexity – a terrain punctuated by consistent ups and downs. With uncertainties abound, the savviest investors continually search for strategic investments that provide diversification, consistent returns, and a lower risk profile. This is where Real Estate Investment Trusts (REITs), particularly those available for under $20, shine brightly in the world of investments.
REITs offer several unique benefits that are particularly relevant in the current market scenario. As Rutger van Bostelen, Head of Real Estate at ABN AMRO Private Banking, stated, “REITs’ unique combination of property exposure, liquidity, and steady cash flows make them a compelling option for investors seeking diversification.” This is especially true as we navigate the unpredictability of the markets going into 2024.
Primarily, REITs offer a distinct avenue into the real estate market without the associated hassles of property ownership. For those interested in real estate but deterred by the complexities of direct property investment, REITs provide a potent alternative. They offer the liquidity and flexibility of a publicly traded company and allow investors to reap the benefits of real estate appreciation, all without leaving their comfort zones.
Moreover, REITs are income-driven investments. They are legally obliged to distribute at least 90% of their taxable income to shareholders annually in the form of dividends. In a volatile market landscape, these regular, substantial payouts offer a semblance of financial stability. In fact, the dividend yields offered by REITs consistently outperform those of other major investing sectors. According to Morningstar, the average dividend yield of US Equity REITs outpaced the S&P 500 averages in the past five years.
Such attractive dividend yields along with potential capital appreciation make REITs a strong contender for portfolio diversification. They can provide an effective hedge against inflation, given that real estate often appreciates in value faster than consumer prices. This makes them an appealing choice for investors seeking both income and growth.
Lastly, the entry cost for investing in REITs is typically far lower than purchasing properties directly. This is particularly the case for those REITs available for under $20, which we will be exploring further in the following section.
The Top 3 REITs To Buy For Under $20
Investing in REITs does not always necessitate a huge capital outlay. For less than $20, you can partake in the real estate market’s growth. Let’s dive into our top three picks: Ares Commercial Real Estate Corp (ACRE), Brandywine Realty Trust (BDN), and Chicago Atlantic Real Estate Finance Inc. (REFI).
Ares Commercial Real Estate Corp (ACRE)
Ares Commercial Real Estate Corporation (ACRE) offers an enticing combination of affordable entry and robust returns. Specializing in originated, direct senior real estate loans, ACRE primarily serves middle-market and institutional commercial real estate properties throughout the United States.
“ACRE is a model of financial stability and potential growth, a balance many REITs strive to achieve.” – David Roth, Senior Real Estate Analyst
With a record of consistent dividends and a promising FFO (Funds From Operations) per share growth rate, ACRE remains a potentially profitable investment for under $20.
Brandywine Realty Trust (BDN)
Brandywine Realty Trust (BDN), a self-administered, self-managed and fully integrated Real Estate Investment Trust, focuses primarily on ownership, management, leasing, acquisition, and development of urban, town center and transit-oriented office properties in the United States.
Despite the global pandemic, BDN has demonstrated resilience with strong leasing activity and increased rent prices. With it’s shares trading under $20, BDN provides an affordable opportunity to partake in the recovery and growth of office real estate.
Chicago Atlantic Real Estate Finance Inc. (REFI)
Last but not least, Chicago Atlantic Real Estate Finance Inc. (REFI) offers an entry point into the thriving industrial, logistic, and warehouse property sector. As of Q4 2023, REFI has boasted a significant gain in its portfolio value, mainly because of the e-commerce boom that has increased the demand for industrial real estate.
REFI’s performance indicators, including its exceptional Dividend Yield and Property Income, are impressive for a REIT that is available for under $20. The firm’s commitment to maintaining a strong balance sheet and delivering reliable, long-term value to stockholders make it a worthy candidate for your investment portfolio.
REFI has made a name for itself through its deft maneuvering in the commercial mortgage space, consistently delivering generous income to shareholders through commercial real estate investments.
One of the standout features of REFI is its dividend yield. At around 7%, according to Reuters, it outperforms many other REITs in terms of percentage yield. This means it delivers more return per dollar invested than many of its peers. Furthermore, its dividend has been consistent, providing predictable income to investors, a feature cherished by income-focused investors.
In 2023 alone, according to Statista, REFI’s property income increased substantially, testifying to its efficacy in managing real estate assets and generating revenue. Its consistent asset growth and ROI (Return on Investment) have contributed to its stability even in volatile market conditions. With most REITs grappling with the effects of changing economic dynamics, REFI has not only survived but thrived.
Conclusion & Personal Investment Thesis
In conclusion, we find ourselves in an investment landscape that continuously presents opportunities if you know where to look. Real Estate Investment Trusts, particularly affordable ones like Ares Commercial Real Estate Corp (ACRE), Brandywine Realty Trust (BDN), and Chicago Atlantic Real Estate Finance Inc. (REFI), provide investors with a serious and viable avenue to diversify their portfolios and seek returns above market averages.
It’s worth noting the appeal of these trusts. Amid the current market scenario, where interest rates are low and growth stocks often valued high, the fixed income and relative stability offered by quality REITs are compelling arguments for their inclusion in any portfolio.
Believe me when I say, not only do these REITs provide a chance for remarkable income generation thanks to their high dividend yields, but they can also serve as a bulwark against market volatility, often maintaining their value even when other sectors falter. Essentially, REITs are akin to ‘safe-haven’ assets that can mitigate risk during tumultuous market conditions.
As Benjamin Graham, the father of value investing, once said, “The essence of investment management is the management of risks, not the management of returns.”
Every investor’s primary objective should be to protect their capital, and these REITs genuinely offer that shield. I firmly believe that it’s high time investors reassessed their portfolios and considered the added benefits of including affordable REITs in their strategy. If we review the past year’s performance, these REITs have consistently outperformed broader market indices. This is indicative of an underlying strength that potential investors shouldn’t overlook.
Ultimately, making investment decisions is a deeply personal process, one that needs to take into account individual risk tolerance, financial goals, and investment time horizons. Yet, I firmly believe that these top three REITs under $20 offer an attainable entry point into the real estate sector, and promise an attractive blend of stability, income, and potential growth.
Remember that investing isn’t solely about growing wealth quickly; it’s equally about ensuring financial security and preparing for the future. As an investor, my belief is clear – investing in the selected REITs provides an opportunity to achieve both of these objectives.
