It would be best to delve into the general concept of REITs in general before we dive into subsets of REITs such as mortgage REITs. See, a REIT is simply a trust (a financial vehicle) where an LLC or business entity is able to own a variety of properties in different areas. These areas may fall under commercial segments (office parks, business centers), entertainment segments (movie theaters, malls, hotels), long term retirement facilities, hospitals and other places. Then there are REITs that are focused fully on residential segments such as multi-family rental apartment buildings, manufactured housing, and other segments.
But when investing REITs, interested individuals will have to look for different factors and do their due diligence to make certain that they weather different types of economic storms. For example, when an individual is looking to invest in residential REITs, they will want to check for areas that have high costs of living, where home are quite expensive and individuals choose to stay in multi-family rental apartment buildings because that is the only option. A residential REIT that is worth their salt would invest in areas such as these that have higher levels of continuous rental income at similar levels all throughout economic cycles.
What Are the Risks of Investing in REITs
The risks of investing in REITs are simple, when interest levels go up, asset prices may generally go down, this means that individuals will have account for interest rate fluctuation. Investors may run to cash or cash equivalents when interest rates are rising. The next thing we will want t account for is that of various issues that may affect real estate property prices.
Michael Nierenberg and Company
But Michael Nierenberg and his current company members have looked elsewhere for their high returns. For their returns, they’ve looked at a special branch of REITs called mortgage REITs. Michael Nierenberg and his company are focused on making certain that they are able bring in the right returns throughout every single environment, in great times, and in bad times. Michael Nierenberg and his company understand that times change and it is best to be prepared with proper hedging through the right financial instruments.