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WHAT YOU NEED TO KNOW ABOUT HEALTHCARE REITS

Population growth, aging demographics, and seemingly small or drastic shifts in

consumer preference have all fueled the growth in non-hospital healthcare locations

and therefore in healthcare REITs.

The industry these specific REITs revolve around has been growing significantly

for decades now, thanks in large part to the aging Baby Boomer populace. As such,

many of these REITs have shown strong performances for a while now, with more of

that still to come.

There is such thing as oversupply, of course. To be clear, that could become

an issue in this sector, especially with the increase in urgent care centers around the

country. So investors should be aware of this potential risk when evaluating where

different healthcare REITs are building and buying facilities.

Another potential problem – or bargain buying opportunity – to watch out for

are any changes to Medicare and Medicaid reimbursement plans. Most in-the-know

establishments limit their exposure to such government whims by leasing to tenants

that emphasize private-pay care instead. However, not all of them do, making it an

issue to stay aware of when analyzing this segment of real estate investing.

One final factor (though not always a negative one) to keep in mind is that

healthcare REITs normally employ what’s known as long-term triple-net leases. These

involve the tenant footing the bill for all or nearly all upkeep and maintenance bills for

the building(s) in question. And that’s on top of the rent.

Because these business agreements fall so far out of the tenant’s favor, they’re

typically cheaper than they otherwise would be. They’re also not going to rise as much

even when they end and need to be renegotiated.

This more often than not leads to very stable dividend production. Some might

even call them boring, and the same goes for their actual share prices.

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