Things to worry about when buying that REIT

The Ticker

June 18, 1999|By Julius Westheimer

ARE YOU thinking of buying real estate investment trusts (REITs) for high income, often up around 8 percent? Proceed carefully. Here, according to Forbes, June 14, are danger signals:

"Dividend shouldn't exceed 80 percent of a REIT's operation funds. Look past financials and examine properties. Gritty properties are the first to lose tenants. Avoid REITs whose debt exceeds 150 percent of equity."

START YOUNG: "If you make a $2,000 annual contribution to an IRA at age 25 and stop at age 35, you'll end up at age 65 with $895,612," says Money, July. "If you don't begin until 35 and put $2,000 in for the next 30 years, you'll have only $443,826 at age 65. These returns assume 11 percent compounded annual growth."

BOND MARKET: "Interest rates on government student loans will dip below 7 percent on July 1, making student loans better deals than auto or home mortgage loans." (Kiplinger Washington Letter)

"Bonds are due for an upswing. Inflation-adjusted `real' yields on 10-year Treasuries hover around 4 percent, 25 percent above their average of the last 35 years. Even if inflation edges higher, `real' yields would be attractive." (Wright Investors' Service)

"The Fed will eventually be forced to tighten by enough to push down economic growth, and bonds should suffer in the process." (Bank Credit Analyst)

Pub Date: 6/18/99

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