Rising Interest Rates Prove Challenging For Net Lease REITs
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While it is difficult to say when exactly federal interest rates will increase, some say that when “interest rates do rise, many net lease REITs could face serious financial challenges.”
REITs, or Real Estate Investment Trusts, are securities that invest in real estate through properties or mortgages.
According to WealthManagement.com, “if rates rise, valuations on flat-rent properties will almost certainly fall. Also, “as interest rates rise, passively investing in flat-rent net lease real estate properties will no longer generate growth, or protect capital.”
In order to protect themselves, some investors have “[shifted] their preference to real estate with significant upside potential, both through contractual rental increases and by actively managing the assets to enhance value.”
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