Some investors appear to be concerned that rising interest rates could hurt real estate investment trusts, but this shouldn't make you turn your back on this great asset class.
Investors concerned about the impact of interest rates on REITs posit that even a slight jump in interest rates will heighten borrowing costs, which will then eat into REITs' bottom lines and impede their ability to pursue acquisitions.
We remain convinced, however, that the strength of the housing sector is prominent enough to offset the potential complications that could arise from an increase in interest rates. What's more, the correlation between rate hikes and REIT performance may not be as strong over the long term as we have been led to believe.
The most important things to take into consideration, even more so than interest rates, are the dividends paid out by a particular REIT and the growth of cash flow. For the most part, these numbers are trending in the right direction. Although interest rates could hurt the short-term prospects of REITs, it's unlikely that they will hurt them over the long haul, especially when real estate is in such a good place.
That said, you don't have to take my word for it, but rather hedge your bets. It's entirely possible to invest in REITs that aren't as susceptible to interest rate hike ramifications as the rest of the industry.
In fact, there is one REIT that appears to be more than ready to weather the storm of a rate increase and still produce encouraging dividends: Blackstone Mortgage Trust (BXMT) . Instead of worrying whether your REIT investment portfolio will be hurt by a rate hike, consider the prospects of Blackstone Mortgage Trust.