401(k)’s Investing in Commercial Real Estate
The 401(k) has been one of the greatest tools of wealth building for the common man since it’s inception. As a machine for raising capital it is also an amazing tool. So when commercial Real Estate Investment Trusts (REITs) have become an option in the average investors 401(k), the market takes notice.
2006 was the big real for commercial REITs as they soared 34.4 percent in value. This year the growth is more tepid, but investment dollars are still rolling in and properties are changing hands frequently with all of the new capital coming in. So when making your real estate investment decisions, never forget the power of the 401(k)
New investors are also becoming lured into real estate investing as they become more familiar with the REIT structure. An increasing number of 401(k) pension funds have added REIT investment options, while many pension funds have increased their real estate allocation. Global markets have also witnessed the introduction of more REIT products, and curious foreign investors are apt to sightsee among the U.S. offerings.
Still, valuations are high, and it might be overly ambitious to expect double-digit returns. Demand for office space in the first quarter generally slowed, and like other segments of the real estate market, it’s all about location, location, location. Savvy investors need to look for those companies where demand for office space remains high and rent even higher. That means markets such as New York, California, and the metro D.C. area, which bear witness to tight supply and rental increases. via [Fool.com]
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