Ready to get more serious about investing? You might consider equity real estate investment trusts as part of your diversified portfolio. These securities are generally known as REITs and are publicly traded companies that invest almost entirely in real estate properties such as residential and commercial properties, hotels, storage units, offices, or warehouses. Although hundreds of different equity REITs are trading on the market today, we’ll focus on the top 7 best REITs to buy right now. Read on if you’re new to investing or want a refresher course on REIT and its workings.
Kimco Realty (KIM)
Kimco Realty is a leading owner and operator of United States neighborhood and community shopping centers. The company’s portfolio, which is fully leased to a diverse tenant base of national retailers, contains approximately 932 properties in 38 states and Puerto Rico. Kimco’s portfolio also includes 34 properties under development and seven properties held for sale. The company’s properties are 99% occupied, with the average remaining lease term of approximately 12 years. As a result, Kimco is expected to benefit from several secular tailwinds in the retail real estate industry, including e-commerce growth, rising consumer spending, and the shift toward omnichannel retailing. At the same time, Kimco’s portfolio is less exposed to risk in areas such as the greater New York City area and Southern California, where retail real estate is most impacted by e-commerce growth.
Equinix is the world’s largest provider of internet data center services and solutions. The company’s business is split into two segments: (1) International Business Exchange (IBX) and (2) Data Center Services and Solutions. The IBX business consists of a network of interconnected data centers that enable customers to host, store, and interconnect their businesses’ IT systems in a way that optimizes productivity, security, and scalability. The data center services and solutions business provides colocation and cloud services and other value-added solutions to its customers. A global shift toward cloud computing is positively impacting Equinix’s business model. The company has also been expanding its presence internationally, particularly in Asia, where internet adoption is increasing. Additionally, Equinix has been actively pursuing a strategy of acquiring smaller data center operators to further expand its footprint.
NexPoint Residential Trust (NXRT)
NexPoint Residential Trust invests in single-family rental properties in the United States. The company’s portfolio consists of properties leased to tenants under long-term contracts. NexPoint has a diversified portfolio of rental properties, including single-family homes, condominiums, townhomes, and manufactured homes. The company also owns and manages a portfolio of properties under a joint venture with American Residential Properties, Inc. NexPoint is expected to benefit from the secular growth of the single-family rental market, driven by a shift in investor focus away from the multi-family rental sector, where demand has softened. As the housing market continues to recover, investors are expected to increasingly focus on the single-family rental industry, which is less sensitive to interest rate fluctuations than the multi-family sector. Single-family homes also have shorter lease terms compared to multi-family properties. As a result, single-family rental properties are expected to generate higher rental income and greater cash flow compared to multi-family properties.
Broadstone Net Lease (BNL)
Broadstone Net Lease invests in a diversified portfolio of commercial real estate properties, including office, industrial, retail, and self-storage properties. The company’s investments are primarily in net lease properties; properties leased to tenants responsible for maintenance and property taxes), focusing on office, biotech/life sciences, and core logistics assets. Broadstone Net Lease’s investment strategy focuses on core real estate sectors and seeks value-added opportunities with lower-risk profiles. The commercial real estate market is expected to be positively impacted by several factors, including rising demand for office and industrial space and the shift toward e-commerce. Additionally, net lease properties are expected to generate higher cash flows than gross lease properties, where tenants are responsible for taxes and maintenance costs.
Equity REITs are generally considered conservative, low-volatility investments with relatively high income that make for a good core holding in an equity-heavy portfolio. However, REITs are also dividend-heavy and tend to be more cyclical than other equity sectors, such as technology. In addition, most equity REITs are highly diversified and are not expected to significantly impact rising interest rates or economic recession. As a result, equity REITs may create a good core holding in a long-term stock portfolio.