Premium Financial News

Whats one way to play falling interest rates? Real estate!

Weve covered all kinds of real estate topics on this blog, as it is one of the better yielding asset classes in a volatile market. Also, low borrowing costs make real estate more attractive than it might ordinarily be in poor economic times.

So what should you make of REITs? Are mortgage REITs the way to play the market, or would property REITs be a better bet?

Key Differences Between Mortgage REITs and Property REITS

Both mortgage and property REITs are legally required to disburse 90% of their net income in the form of dividends. So this difference does not come into effect for most investors. However, differences do exist in the investing strategy.

Mortgage REITs hold mortgages. This means that a mortgage REIT is not a property owner; it does not earn an income by purchasing property and renting it, or buying and selling property for quick real estate profits from flipping.

(…)

“The problem with socialism is that eventually you run out of other people’s money.” –Margaret Thatcher
“The individual serves the industrial system not by supplying it with savings and the resulting capital; he serves it by consuming its products.”–John Kenneth Galbraith
Therein lies the dilemma in which Europe finds itself. In today’s circumstance, we could substitute Angela Merkel for the former British prime minister and a chorus of Keynesian economists for Galbraith. Germany is afraid that ultimately it will be on the hook for the profligacy of its southern neighbors who, while repentant, are convinced that the cure of austerity is worse than the disease of insolvency. And now the people have spoken, and to no one’s surprise they have sided with the Keynesians, while the Germans are checking for their wallets.
The philosophical battle between strict austerity and a desire for more growth-oriented initiatives played out in elections across the Eurozone over the weekend, and the result was a repudiation of the German fiscal model. In France (…)