The Intelligent REIT Investor Guide

CHAPTER 4Residential REITs

“The true investor … will do better if he forgets about the stock market and pays attention to his dividend returns and to the operation results of his companies.”

—Benjamin Graham

Certain things are true of all commercial properties. For instance, their value and profitability depend on property‐specific issues such as location, lease revenues, property expenses, occupancy rates, prevailing market rental rates, tenant quality, and replacement costs. There's also market capitalization (cap) rates, supply/demand conditions, and local competition to consider, as well as “macro” forces like the economy, employment growth, consumer and business spending, interest rates, and inflation.

Yet that doesn't make every property type equal. The owner of a large, luxury apartment complex, for example, has very different financial concerns than a neighborhood strip mall landlord or someone who runs a large office building. That's why it's important to understand the ins and outs of each before you begin investing in any of them.

The four principal commercial property types are residential, industrial, office, and retail. Some of those have subtypes with their own unique characteristics, including manufactured home communities and student housing for residential; lab, research space, and warehouses for industrial; and malls, outlets, and shopping centers for retail.

There are still other important areas of focus from there, such as hotels and lodging, self‐storage, ...