The problems facing WeWork’s woes may spell trouble for office REITs. Here are some signs that REITs may be in trouble.
A tax position may be changing. When a real estate investment trust owns the property and its income is derived from its use of that property, the real estate investment trust will have to pay taxes on those profits. If an investor borrows money to purchase such a real estate investment trust, it could lose some of its potential yields.
Many real estate investment trusts have defaulted in the past. Investors that purchased REITs will want to check the numbers before making their investment. REITs should show default rates similar to many other forms of investments. Realty values generally drop during slow economic times.
REITs have historically invested in different forms of real estate. For example, they typically invest in hotels, office buildings, shopping centers, and non-residential properties.
Reits not required to sell
REITs are not required to do anything in particular with regard to their holdings. They are also not required to sell any of their investments. Investors can choose to sell shares, or dividends, or even cash. They also have the ability to acquire shares at any time, as well as the ability to open up “branches” in different parts of the country.
One reason that REITs are an ideal choice for investors, is that they invest at discount prices and that gives them the advantage of being able to reap the highest profits while maintaining a lower risk profile. They also do not have to bear the high operational costs associated with most commercial properties.
An important tip for REIT investors is to try to track the ups and downs of WeWork’s assets. It is vital to understand the ups and downs of a major business to ensure you buy at the lowest possible price and to remain a good long term investment. Investors are advised to look out for trends as they would be closely watching a stock price. This will enable them to move if necessary.
The failure of a WeWork, or other real estate investment trust, may negatively impact this company’s performance. If this company becomes unable to meet its obligations, then other REITs that are rated higher than it will be more attractive.
High rents in the office spaces
Office space can be expensive, depending on its location and amenities. A space that is less desirable could help the REIT, however, it may also take away the equity investment opportunity.
When a REIT makes a claim on space, it may not necessarily be all that they own. These claims could turn out to be very costly, even if they are true. Whether this is a good decision or not depends on your specific needs and strategies.
If you are looking for office space, it is crucial to understand the reality of how the industry works. There are often variables that make renting or buying office space with a bit of a gamble.
However, the idea behind real estate investment trusts is the same as buying and selling shares of publicly traded companies. Some of the risk factors are the same. Investors should therefore always be aware of what is happening in the market and act accordingly.