Are we headed for a recession? Some financial experts are convinced of this. Others, not so much.
Either way, we are in the midst of tough economic times. On the one hand, employment growth has been strong and steady. On the other hand, inflation is skyrocketing, and the stock market has had its fair share of turbulence over the past four or five months.
But regardless of the date of our next recession, it’s important to build your portfolio to weather a period of economic distress. And buying the right REITs, or real estate investment trusts, could put you in a solid position to weather a recession and do just fine on the other side. Here are three REIT sectors to consider.
1. Healthcare REITs
Healthcare REITs are companies that operate different types of medical facilities, from hospitals to skilled nursing facilities to emergency care. What makes healthcare REITs such a good buy is that they are likely to hold up well during economic downturns.
The reason? Health care is a permanent and essential need. Even if economic conditions deteriorate and consumers are forced to cut back on spending, they’re likely to skip the movies or a trip to the mall before forcing themselves to endure a nasty sore throat to save money seeing doctor. And when medical emergencies arise, people have no choice but to seek out and spend money on health care – like it or not.
2. Self-storage REITs
The pandemic has changed the living conditions of many people. Now, workers are trying out new cities — an option made available through remote working agreements — and experimenting with different housing configurations.
This has already led to an increase in demand for self-storage. But even in tough economic times, self-storage companies will likely do just fine.
Why? For one, self-storage is relatively inexpensive. So consumers are more likely to cut another expense rather than stop paying for self-storage and be forced to get rid of their belongings.
Additionally, when economic conditions deteriorate, many people have to downsize their homes, leaving them with an excessive amount of goods to store. As such, it’s easy to argue that self-storage facilities are actually poised to thrive during a recession.
3. Residential REITs
Residential REITs operate apartment buildings and complexes. And that’s a good deal to do right now.
These days, house prices are skyrocketing and mortgage rates are following suit. This makes it even harder than usual for people to buy homes. As such, there has been an increase in rental demand, and residential REITs are benefiting from this.
But residential REITs are also likely to perform well in a recession. Even when the economy is bad, people will still need a roof over their heads. That alone makes these REITs a solid bet.
It’s all about choosing the right investments
Ideally, your portfolio should consist of a mix of investments, and some of them should be specially designed to withstand a recession. It’s worth considering investing in healthcare REITs, self-storage REITs, and residential REITs, especially if you think an economic downturn is imminent.