Should senior housing REITs be a part of your portfolio? A real estate investment trust (REIT) is a company that owns, or finances, income-producing real estate. Like mutual funds, REITs provide retail investors with dividend-based income and long-term capital appreciation. Diversified or specialty REITs might hold different property types in a portfolio, ranging from apartment complexes to senior housing complexes. Unlike directly-held real estate, your investments in REITs are liquid, with shares traded like stocks on an exchange.

REITs must pay more than 90% of their taxable income as dividends to shareholders. Doing so allows them to forgo corporate income taxes. REITs also allow investors to target industry trends. In the 2010s, urban growth outpaced suburban growth for the first time since the 1920s. But changes during the pandemic and post-pandemic period exposed REITs heavily invested in downtown office spaces to greater risks. An༺ aging population, meanwhile, could present prospects for invest🍎ors to capitalize on changing demographics. Increased demand for senior housing could forecast growth for REITs invested in this real estate segment.

Changes in Senior Housing Needs

By 2030, all baby boomers will be older than 65, and one in five U.S. residents will be 65 or older. By 2034, older adults will outnumber children for the first time in U.S. history, according to U.S. census data.

As Americans age, they will want or need housing that better fits their needs. Often, these options fall under the umbrella of senior housing. This term refers to a range of o𓃲fferings from older adult facilities for independent living to assisted care options for those who need it.

A 2023 study by Harvard University's Joint Center for Housing Studies reveals the following:

• Almost 70% of those who reach age 65 will require long-term care services for an average period of three years, and 20% will need it for five years or more.
• In the previous decade, the population 65 and over has increased by 34%, from 43 to 58 million. At the same time, the share of households headed by older adults increased to 27% of all U.S. households.
• As people age, they are far more apt to choose housing with accessible design features such as extra-wide hallways and doors, no-step entry, accessible electrical controls, and, most commonly, single-floor living. Many of these features are best found in new builds, not the existing housing people have, which are often prohibitively expensive to add on after the fact.
• The share of people relocating to more accessible housing rises from about 25% of those moving in their 50s to more than a third in their 70s to more than half of movers in their 80s. 
• Even as the older population has grown in recent years, the number of adults living in group homes has shrunk, with the share of the 65-and-over population in nursing homes falling by 20% thus far in the 2000s. The decline reflects how those aged 65 and over are comparatively healthier, as well as the greater variety of options for care, such as supportive housing and assisted living, in which older adults receive services where they live but have their own private units.
• Wealthier seniors have more options in terms of senior housing.

These and other demographic trends are favorable to senior housing REITs. The question remains: Are these a good investment? Like most investing options, the answer depends on your investing strategy as well♛ as those prospects that are available.

Consider These Factors

Investing in pub𝕴licly traded REITs is like investing in any other company. For starters, you should know who manages the company. What is the business and iꦐnvesting strategy? What is the company’s track record? You will have many of the same questions you would ask and research before investing in Apple, Tesla, or any other individual stock.

Se🦂nior housing REITs occupy a space in real estate and healthcare. The percentage of healthcare, specifically senior living REITs, will vary from REIT to REIT.

Beyond t𓆉he questions above, you should first find out how the REIT makes money. Within this broad category, some REITs invest in older adult-oriented apartments ꦏand communities, assisted living facilities, and properties, such as medical buildings with staff dedicated to the needs of older adults.

Like many trends we see across the business world, companies tend to jump into a business segment when they spot profit potential. Senior housing is no exception. While the demographics are favorable to senior housing facilities of all types, an oversupply could 🦋cut into their profitability and, thus, the profitability and cash flow of REITs.

Like all REITs, senior housing REITs can be sensitive to interest rate changes, which may affect their performance. You should 🐭thus consider the sustainability of dividend payments and the overall health o📖f the real estate market.

Dividends and Income 

REITs are known for generating dividend-based income. For example, the Vanguard REIT ETF (VNQ), an 澳洲幸运5官方开奖结果体彩网:index fund tracking the MSCI U.S. REIT index, has a 12-month unadjusted effective yield of 2.27% as of Dec. 4, 2023. ಌSome major healthcare REITs, like the rest of the real estate market, have experienced the negative effects of heightened interest rates in the Federal R💜eserve's battle against inflation.

The Bottom Line

Demographic tren🅺ds favor senior housing REITs and healthcare REITs with significant holdings in this sector. Before investing in them, however, there are several points to consider.

First, while the dividend income of many of these REITs can be tempting under circumstances that favor high yields, consider whether they are sustainable and what additional risks they might incur. Second, higher interest rates impact REITs, and it's best to assess how interest rate hikes would affect your REIT holdings before you invest. Lastly, while the demographic trends are promising, it is important to stay on top of the supply of senior housing compared with the potential demand.​​