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- Investing
By Ben Baden
Real estate funds are up about 17 percent so far this year
Believe it or not, there's a rally in real estate -- commercial real estate, that is. So far this year, real estate funds, which
invest primarily in real estate investment trusts (REITs), have returned about 17 percent. And over the past year, they've gained almost
40 percent, according to
Some experts say investors have flocked to REIT funds for their yields. Some traditional investments like money market funds
are yielding practically zero because interest rates are so low. After the subprime mortgage crisis, all real estate investments
were punished, but the news is improving somewhat in the commercial real estate sector. More people are renting instead of
buying, and earnings growth is expected to pick up in the near future, says Marc Halle, managing director
for
There a few important things to know about investing in real estate funds. A REIT owns a collection of commercial real
estate properties, all with tenants who pay rent. REITs are not required to pay corporate income taxes, but they must pay
out 90 percent of their net income as dividends to shareholders. This means that REIT funds generally have fairly high yields.
Most investment advisers suggest putting no more than 5 and 10 percent of your total assets in these sector-specific funds,
says
It's important to differentiate: Commercial real estate and residential homebuilding have little to do with one another, Halle says. Also, real estate isn't a commodity like gold or oil. The quality of the properties varies from region to region, Halle says. "It's location, location, location," he says. Fund managers select REITs based on where the properties are located and by which industries look most attractive. They invest in them by buying the stocks of each of these REITs, which are made of a group of properties.
What that in mind, here are three of
This fund is run by Ken Heebner, who is best known for managing the high-flying
CGM Realty's portfolio turnover is close to 200 percent, according to
Available at Amazon.com:
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