Check Into a Hotel REIT

One thing to keep in mind when buying real estate as a long-term investment is that this is not traditional value investing. Most of my moves in real estate are much closer to distressed investing than classic deep-value investing. Many of these companies, especially real estate investment trusts, have far more debt on the books than I am usually willing to consider. Whatever margin of safety exists is a result of the probability of an eventual recovery in the commercial real estate market and management's ability to manage the debt load. This is especially true when buying the equity of preferred stocks issued by REITs.  (Investing in debt in distressed, asset-rich companies is a subject for another day.)

One of the more distressed groups in the real estate space is hotel REITs. The higher-end properties in markets such as New York and Washington D.C. have held up during the long real estate recession, but properties out of the glamor zone have not fared as well. Occupancy rates have been down and room rates have fallen for several years. Room rates have been edging higher this year as the economy slowly recovers, but they are still well below the peak levels of early 2007....517 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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