5 Real Estate Investment Trusts To Buy Now

The prospects for these REITs are good, and their share prices haven't run up as much as the rest of the sector.

Real estate investment trusts are on a roll. Property-owning REITs in the FTSE Nareit US Real Estate index returned an eye-popping 15.3% in the fourth quarter of 2011, beating Standard & Poor's 500-stock index by 3.5 percentage points. For the year, property REITs gained 8.3%, clocking the S&P by 6.2 points.

One terrific quarter isn't necessarily a harbinger of additional gains. But things are looking good for REITs. Commercial real estate fundamentals are favorable, led by signs of a moderate but sustainable economic upturn. Apartment REITs remain attractive because young people with good-paying jobs don't want to tie themselves to one city. So they'll pay higher rents rather than buy a house, low mortgage rates or not. Retail property values are seeing a bump from the upturn in consumer spending. Most retail REITs will barely feel the wave of store chain closings. For example, Kimco Realty (symbol KIM) says spaces vacated by Borders bookstores and Super Fresh supermarkets took its overall occupancy rate from 93.5% all the way down to 93%.

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Jeffrey R. Kosnett
Senior Editor, Kiplinger's Personal Finance
Kosnett is the editor of Kiplinger's Investing for Income and writes the "Cash in Hand" column for Kiplinger's Personal Finance. He is an income-investing expert who covers bonds, real estate investment trusts, oil and gas income deals, dividend stocks and anything else that pays interest and dividends. He joined Kiplinger in 1981 after six years in newspapers, including the Baltimore Sun. He is a 1976 journalism graduate from the Medill School at Northwestern University and completed an executive program at the Carnegie-Mellon University business school in 1978.