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Mar 8, 2010 9:28 pm

Advisors should not invest in REIT's unless they know something about real estate investing.  This is not like buying an index fund or something.  I have talked to other advisors about REIT's that had no f-ing idea what they were talking about, and then wonder why NAV's dropped at of the sky.  They couldn't explain it to their clients, they never set up their clients properly, etc.  Buying a REIT should be like buying a house.  Ask your client if they are concerned about the value of their house today, if they plan on living their the next 30 years.

Personally, I think non-public REIT's should only be avaliable to accredited investors.  Small-time investors usually can't comprehend the issues involved with real estate.

The electronic age has made investing a pain in the a$$.  Clients crying about the value of their brokered CD's, the fluctuation in bond prices, REIT's being revalued, etc. 

Incidentally, I would stay the he!! away from any REIT's that has even a small allocation to hotels.  There are only a select number of people that make money on hotels, and it's ALL about the deal.  Money is made when you buy and when you sell the property.  Everything in between is just noise.  Get in at the right CAP, get out at the right CAP, don't get caught in a downdraft.  It ain't easy.  And with so many distressed properties out their right now, existing REIT's are in trouble.  If borrowing costs start to go up, balloon payments coming due, refinancing will either be tough or non-existant, and it minimum EXPENSIVE.  The easy money train left the station a while ago.  But for those that are opportunistic, there will be lots of money made in hotels the next few years (on the BUY side of the transaction, high CAPS, still in a downdraft).