Seattle Bubble Forum Archive

Hi all,

I've been wondering about something for a while and maybe you can help. As part of my employer-sponsored retirement fund, I own shares of Vanguard's REIT index fund. I've been surprised to note that it is my only fund comfortably in the black year-to-date. (My portfolio includes a variety of funds in various categories, including a good portion of international funds.)

So, my question is, how can REITs make money in the face of the real estate bubble deflation? I've done some reading, and I guess I still don't understand exactly what REITs actually do... I picked up one tidbit someplace (maybe here in the forum or in the comment threads) that REITs are a source of funding in the current credit-constricted environment, so that could help them make money. Is that all there is to it, or is there something else? Is it an indication that the "market," which supposedly is forward-looking, has come to the conclusion that the real estate bad times are nearing an end?

Thoughts?

-Rick

REITS invest in a lot of different kinds of property, from apartment buildings to shopping centers to warehouses, and REITS buy in many different regions.
Although real estate prices are down in most parts of the US, there are many places where you can buy a commercial building and have the lease income more than cover the costs. Not in Seattle, but there are still quite a few places where rents are rising and purchase prices are dropping.
I don't think it indicates anything about a RE bottom one way or another.

I once owned a REIT that operated mega discount malls. REITs are structured to get special tax treatment but in return they are required to pay out some percentage of their profit or revenu as a dividend.