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Property prices in the UK have been falling for some time now. I think this means there is a huge opportunity for investors looking for passive income.
A report earlier this week found that 60% of homes priced below £500,000 are selling below their asking price. But it’s not the housing market that catches my eye at the moment.
The warehouse industry has been hit hardest by the recent decline. As a result, I think there are some great opportunities for real estate investment trusts (REITs) in this sector.
A REIT must distribute 90% of its rental income to its shareholders. This means they are unable to use the cash they generate to fund acquisitions and rely on debt.
As a result, interest rates have risen and property prices have fallen. Demand in the real estate market subsides as borrowing to fund purchases becomes more expensive.
This is especially true for industrial properties, which were previously in strong demand. In 2021, investors have spent over £18 billion to buy warehouses to benefit from the rise in e-commerce.
Now that the tide is turning, REITs that own warehouses and distribution centers are beginning to find their assets declining in value. The industrial real estate bubble appears to have burst.
As a result, stock prices have plummeted.Share in last 12 months Seguro fell 35%, making it one of the worst performing stocks. FTSE100.
return on investment
However, I think the sale of UK warehouse REITs misses the point. Good returns have been offered to passive income investors, even as rising interest rates have weighed on prices.
Despite falling prices, the amount of warehouse space leased in the UK actually increased in 2022. And rental income from industrial property grew faster than other real estate sectors.
remembered here Warren Buffett’s advice. What matters to investment returns is how much cash a business generates, not what the price of an asset will be.
Buffett points out that those who personally own the business would not get an estimate of how much they could sell the business for on a daily basis. to see if there are any.
In general, warehouse-focused REITs have produced good returns despite falling stock prices. This is attractive at today’s prices.
i especially like Warehouse REIT As an investment opportunity in this sector. As its name suggests, its portfolio is entirely focused on industrial real estate.
Over the last 12 months, the stock has fallen about 35%. But the company’s latest deal update seemed pretty strong to me.
Rental income increased 3% and adjusted EBITDA increased 7%. Management also dividendthe current yield is about 6.5%.
To me, this seems like a rare opportunity. With the rise of e-commerce driving up the price of industrial real estate, I think it’s time to act.
I expect interest rates to rise further, which puts the value of the company’s portfolio at risk. However, the outlook for this stock looks promising from a passive income standpoint.
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