When investors think about real estate, they tend to think about buying physical property. You purchase a home, flip a house or even look for some small section of commercial real estate to get involved with.
That’s unless you’re someone like Donald Trump with the access, deserved or not, to financial resources needed to gain control of substantial buildings in major urban centers.
Real estate isn’t a bad market. In many communities, the wealthiest households don’t necessarily have high-flying jobs. They collect the rent on a cross section of wisely purchased residential and commercial properties.
The problem is that getting into this market requires a ton of up front capital. Down payments aren’t small, and maintenance costs and taxes add up. For most households, buying physical property as an active investment is simply not practical.
Real Estate Investment Trusts (REITs) let you buy shares in a portfolio of physical real estate, actual homes and commercial rentals, buying in the same way you would buy into a company. Your profits reflect the rents and capital gains generated by those properties, just on a per-share basis.
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It’s not as good as keeping all the profits to yourself, but it’s far more accessible.
For a specific investment, Real Money Columnist Paul Price is currently optimistic about Simon Property Group (SPG) – Get Simon Property Group, Inc. Report and Macerich (MAC) – Get Macerich Company Report. Both run shopping malls, an industry battered by covid and e-tail but still profitable. Of the two, Price thinks Macerich may offer the potential for better gains.
“Back in 2015, MAC was flying high enough to rebuff a takeover offer from SPG at a final bid of $95.50 per share from a previous offer of $91,” Price wrote recently on Real Money. “That refusal to sell proved to be a very poor decision.
As Price goes on to explain, “MAC never got higher since and actually dropped briefly to south of $5 during the worst of the Covid-panic in March 2020.” Still, “Macerich got through those scary times and appears well on its way to a longer-term recovery.”
Price notes that funds from operations are rebounding close to their record levels of 2016. And even a share price rebound to $22.88, where it traded as recently as November, would offer a gain of 45% or more.
“Play Macerich whichever way suits your style. You will likely end up being glad you got ‘malled,’ rather than mauled,” Price wrote.