Four Timely REIT Ideas

Want to buy some real estate? If you're like me and most Millionaire Zone investors, the answer is probably yes.

But in today's cautious market, real estate is far from a sure thing. Buying an investment property is only the beginning of managing it, finding renters and dealing with expenses.

How much diversification do you get? None, unless you can afford multiple properties. And are professionals running the show? Maybe -- to collect the rents -- but not to make the decisions.

How can you buy those special properties, such as a Four Seasons hotel or an upscale assisted-living facility, that you'd really like to own?

Enter the real estate investment trust, or REIT. REITs are investment companies, and as such, they manage a portfolio of real estate investments. They're required by law (to avoid corporate-level taxation) to pass on 90% of earnings to you.

So REITs, by nature, are income investments. In fact, REITs average 5% to 6% annual yield, sometimes more. And there is growth potential, as properties appreciate and rents rise. We like the combination of income and growth potential, don't we?

Collectively, REITs were up some 35% last year and, by the way, did quite well during the 2001 to 2002 market downturn. Some of last year's gains were spawned by private equity takeovers, such as Blackstone's recent $39 billion capture of Equity Office Properties. I like to follow the smart money, and at least some of it is going into REITs.

The REIT universe is also becoming larger and more diverse. I believe many other investors, especially those seeking yield, are headed this way. But here's the hard part: How do you choose among the some 200 REITs? It isn't easy, as they don't get as much press coverage or as much coverage on financial and brokerage Web sites as one would like.

As a result, the research process is quite cumbersome. I divide my time between the Yahoo! Finance Industry Browser and the National Association of Real Estate Investment Trusts Web site. Both give scattered summary data, but you'll find yourself on individual REIT company sites pretty quickly.

Click here for the video version of this story from Jennifer Openshaw.

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