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15 Real Estate Investments in Sectors That Can Withstand Recession

By Marc Rapport - Jul 16, 2022 at 1:22PM
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15 Real Estate Investments in Sectors That Can Withstand Recession

Choose carefully, and you just might weather this storm quite nicely

Real estate has been considered a bulwark against inflation and recession for centuries. But not all real estate investments are alike. Here are some candidates (from multiple sectors) to consider that can help diversify your portfolio while providing income along the way, through whatever economic storms we're about to encounter and beyond.

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Word REIT spelled out on dice sitting atop coins from all over the world.

1. Agree Realty

Agree Realty (NYSE:ADC) is a real estate investment trust (REIT) that owns more than 1,500 retail properties across the country, with a list of recession-resistant, reliable, rent-paying tenants headed up by the likes of Walmart, Tractor Supply, and Dollar General. Agree stock is trading at about $73 a share, yields about 3.8%, and pays its dividends monthly.

ALSO READ: Real Estate Investment Trusts: What They Are and How to Invest in Them

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For Rent sign in front of home.

2. American Homes 4 Rent

American Homes 4 Rent (NYSE:AMH) is one of the country's largest owners of single-family rentals, with a portfolio of about 58,000 houses. While profiting from the ability to raise rents to counter inflation, this residential REIT also builds and sells homes. AMH stock currently yields about 2% and sells for about $36 a share.

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People walking toward a home with a For Rent sign out front.

3. Your own residential rental property

The residential rental market has been particularly hot of late and, with how high housing prices are, will likely continue to be. After all, people need a place to live, whether in a recession, boom time, or somewhere in between. Local knowledge is important. If you don't have it, work with a broker or real estate agent who does before buying.

ALSO READ: Why Owning Rental Property Is 1 of the Best Retirement Moves

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4. Crowdfunded Residential property

While you can either manage your rental house directly or use a property manager, you won't have that choice if you go the crowdfunding route. However, crowdfunding is a popular way to invest in such properties and enjoy passive income while leaving the management to others. Roofstock is a good example of a platform that focuses on single-family rentals.

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5. Crowdfunded commercial property

You can also use investing platforms like RealtyMogul and CrowdStreet (and several others) that specialize in commercial properties like apartment, retail, and office buildings. These make it possible for you to participate in projects that would be well beyond your capacity as an individual investor.

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6. Mid-America Apartment Communities

Mid-America Apartment Communities (NYSE:MAA) is the nation's largest owner of apartments, with nearly 102,000 units in complexes across 16 states. The ability to quickly raise rent and a focus on high-growth Sun Belt markets make this residential REIT look particularly recession-resistant. The company also just raised its dividend by 15% and is yielding about 2.5% at a share price of about $169.

ALSO READ: Investing in Residential REITs

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7. Hannon Armstrong Sustainable Infrastructure Capital

Hannon Armstrong Sustainable Infrastructure Capital (NYSE:HASI) is a mortgage REIT (mREIT), but instead of traditional residential or commercial mortgages, it invests in energy efficiency, renewable energy, and other sustainable infrastructure projects across the country. Interest in green investing like this seems likely only to grow, as climate change concerns will continue through any kind of economy we're in.

This stock is trading at about 40% off its 52-week high, with a roughly $38 share price and a yield of about 3.9%. Coupled with analysts rating it a "moderate buy," it looks like a possible bargain.

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8. Vanguard Real Estate Index Fund ETF

Vanguard Real Estate Index Fund ETF (NYSEMKT:VNQ) is an exchange-traded fund (ETF) that tracks the MSCI US Investable Market Real Estate 25/50 Index by investing in about 160 REITs. Currently, it's yielding about 3.1% at a share price of about $92. And ETFs like this are a great way to invest defensively by spreading the risk across multiple sectors.

ALSO READ: How to Invest in ETFs for Beginners

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A yellow road sign says Mutual Funds.

9. Cohen & Steers Total Return Realty

Cohen & Steers Total Return Realty (NYSE:RFI) is a closed-end mutual fund that pays dividends monthly and is currently yielding an inflation-matching 8.5% at a share price of about $14. The active management of an income-focused fund like this means its stock-pickers can respond relatively quickly to opportunities they see in the real estate market, especially among REITs. This fund's top six holdings are each the largest player in their particular real estate sector, ranging from cell towers to malls.

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10. LTC Properties

LTC Properties (NYSE:LTC) is another monthly dividend payer in a particularly recession-proof sector. LTC serves our aging population with a portfolio evenly split among senior housing and skilled nursing facilities. LTC stock also pays an inflation-fighting yield of about 6% at a share price of about $38.

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11. Public non-listed and private REITs

Many REITs aren't publicly traded. Some are public but non-traded. Some are simply private. These types of REITs can pay higher returns in exchange for the lack of instant liquidity that public stocks offer, and they invest in a wide range of real estate properties, including recession-resistant sectors like essential retail and multifamily projects. They're typically sold by brokers to accredited investors only, with a price of entry that could look pretty high to the typical investor.

ALSO READ: A Beginner's Guide to Private REITs

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A close-up of fiber optic cable.

12. Crown Castle International

Being in a growth industry with a long record of handsome investor returns makes Crown Castle International (NYSE:CCI) a good choice for recessionary times. This infrastructure REIT has a growing portfolio of more than 40,000 cell towers and 80,000 miles of installed fiber-optic cable, as well as a collection of small cell nodes growing at a record pace to meet the demands of 5G rollout across the country.

Demand for this kind of infrastructure will continue through inflation and recession. And a dividend yield of 3.43% can help keep your income going as you wait for Crown's stock price (currently about $171 a share) to recover from its current doldrums and potentially resume its towering growth.

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13. Medical Properties Trust

Medical Properties Trust (NYSE:MPW) is another healthcare REIT with a unique niche: an essential collection of more than 400 hospitals, making it one of the world's largest private owners of such facilities.

Medical Properties Trust has a strong record of dividend payments, including raising the payout by about 3.9% annually for the past three years. Its stock is currently yielding about 7.4% at a share price of about $16. That's down about 50% from its 52-week high, making this real estate stock look like a possible strong bargain as any recession further weeds out weaker companies in its sector and others.

ALSO READ: 4 Reasons Why Medical Properties Trust Is Inflation-Resistant

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A person managing wires at a server inside a data center.

14. Digital Realty Trust

Similar to the tower companies, Digital Realty Trust (NYSE:DLR) is in a business that should prove fairly recession-proof. Digital Realty operates a network of more than 290 data centers worldwide, providing a home base for the movement of data from thousands of customers, including giants like Amazon Web Services, Verizon Communications, Adobe, and Google Cloud.

Like most tech-related issues, Digital Realty stock is off sharply and represents a potential good bargain at a share price of $126 and a yield of about 3.9% that follows 19 straight years of dividend increases.

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15. Realty Income

Last but not least, we have Realty Income (NYSE:O), the poster child of passive-income performance, with more than 50 years of monthly payouts and a portfolio of more than 11,000 retail properties that should continue to pump out the rent through thick and thin.

Realty Income stock is rated a "moderate buy" right now by analysts who, presumably, are factoring in the recession widely expected to emerge soon, and this venerable REIT's stock is yielding a respectable 4.3% at a share price of about $69.

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To REIT or not to REIT -- real estate investing can help you profit through what's coming next

There are many ways to invest ahead of a recession. Real estate has a long record of relative resistance to market downturns, and the options we just reviewed could make some fine choices for your own economic battles ahead.

Choose carefully. Investigate whether the markets and sectors of these stocks and other investments align with your understanding of what looks hot and what's not, and if you're comfortable with it all, take the plunge.

Marc Rapport has positions in Agree Realty, Crown Castle International, Digital Realty Trust, Hannon Armstrong Sustainable Infrastructure Capital, Medical Properties Trust, Realty Income, and Vanguard Real Estate ETF. The Motley Fool has positions in and recommends Adobe Inc., Crown Castle International, Digital Realty Trust, Mid-America Apartment, and Vanguard Real Estate ETF. The Motley Fool recommends Tractor Supply and Verizon Communications and recommends the following options: long January 2024 $420 calls on Adobe Inc. and short January 2024 $430 calls on Adobe Inc. The Motley Fool has a disclosure policy.

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