REIT Bargains Still Exist If You Know Where to Look

Every big real estate boom leaves a few good neighborhoods behind.

Housing prices are high, and real estate investment trusts focused on data centers have been all the rage, but if financial advisors think all REITs have lofty valuations, they’re missing opportunities to find some bargains and diversify their portfolios. Many public ones are still trading at a discount to net asset value, said Sam Adams, co-founder of Vert Asset Management, which holds 150 REITs globally. They can offer value as well as diversification away from the artificial intelligence and technology concentration in large-cap equities worrying some investors. “One of the things that real estate does is it gives you exposure to a real physical asset. So, when intangible assets like tech companies struggle, sometimes the market rotates to real assets as a safety haven,” he said.

Given REITs’ lower valuations compared with the AI and tech sector, real estate might be in a better position if the market cycle changes. Adams points to the dot-com bubble as an example: From 2000 to 2002, REITs saw an annual return of 14.6%, while the S&P 500 lost 14.6% annually. While many of the products underperformed after the Federal Reserve’s rate hikes a few years ago and COVID, which repriced much commercial real estate, REITs may still offer an alternative to expensive traditional stocks and bonds.

For advisors interested in adding REITs, whether public or private, there are a few criteria to consider, as well as strategies for investors seeking to exit their physical holdings in a tax-efficient way. Once advisors move beyond data center and senior housing public REITs, Adams said a broad swath of assets from hotels and resorts to self-storage, warehouses and shopping malls trade under net asset value despite many having strong revenue and operating income. “Everything else is still kind of in the bargain drawer,” he said.

Bed, Bath, Data Centers and Beyond

Scott Eichler, wealth manager at Savvy Advisors and a longtime REIT investor, focuses on several types of public REITs, including multifamily, industrial and mortgage REITs. He likes multifamily REIT AvalonBay because it owns high-quality, high-occupancy Class A apartment buildings in densely populated areas, and Prologis because it owns more than 1 billion square feet of light industrial space. 

To dig into the REITs, he reviews quarterly reports to assess managers’ strategies and studies the pool of assets they own and the areas they serve. Eichler also uses Google Maps for visual checks as well. Analysts’ reports are also useful for understanding a wide swath of the different real-estate sectors. Institutional investors often allocate between 5% and 10% of a portfolio to REITs; Eichler sometimes bumps up that exposure to 18% for clients willing to take on more risk or narrows exposure if a client owns a lot of privately held real estate.

Stephen Tuckwood, director of investments at Modern Wealth Management, favors private equity REITs and is heartened by a positive turn in the National Council of Real Estate Investment Fiduciaries ODCE index in the second quarter of 2026, after a long period of underperformance. “Private real estate tends to move like a big cruise liner … turns take a long period of time to play out,” he said, noting that transactions have started to pick up.

With a sense that parts of the sector are bottoming, he’s now looking at diversified interval funds, perpetual non-traded REITs and traditional private funds, seeking experienced managers with newer funds to avoid older vintages still holding legacy assets that aren’t yet fully marked down.

He’s seeing green shoots in retail and industrials outside of data centers, but he remains leery of the office sector because it continues to go through systemic issues and suggests that the Sun Belt multifamily sector may be oversupplied. 

In Delaware We Trust

Long-term investors who own highly appreciated physical real estate such as rental properties or commercial real estate can sometimes tire of management but face big tax bills if they sell. Barry Kaplan, wealth manager at Modera Wealth Management, has been using a strategy to defer taxes after investors sell property. First, there’s a 1031 exchange into a Delaware Statutory Trust, and after two years, it’s converted into a Section 721 UPREIT, or Umbrella Partnership REIT.

To make the transaction happen, a REIT sponsor, usually a national firm such as JLL or Hines, buys a small basket of buildings and wraps them in the trust, with the former owner receiving fractional interest. The REIT sponsor gives investors a master lease, which provides predictable income. After two years, clients can exit the trust through a 1031 exchange, although most of Kaplan’s clients prefer that the trust converts the real estate to a 721 UPREIT. The asset moves into the REIT’s operating partnership, and clients receive REIT shares in return. This way, physical property is converted to largely passive private REIT ownership.

The strategy offers clients more liquidity compared with traditional real estate investments, and clients can eventually pass on the REIT shares to heirs who receive a step-up in basis, Kaplan said. 

The Old Handyman Special. Like all investments, owning REITs has its risks. Private products have liquidity concerns, while public ones may be subject to fluctuating valuations. With inflation remaining sticky and a new chair at the helm of the Federal Reserve, some advisors may be wary of rates rising again. Certain REITs may be more interest-rate sensitive than others, such as mortgage or homebuilder ones, Adams said, but that may not be the case where there is little development and locked-in lower rates.

He said since the financial crisis, most public products have manageable leverage, explaining the average REIT only has a leverage ratio of about 35%. Also, 89% of their debt is fixed with an average maturity of 5.9 years, with most of that debt likely taken out when rates were lower, he added.  

Eichler said that higher interest rates may have a short-term impact on REITs, but over the long term, rising rates reflect rising growth in the business sector, so there’s not necessarily a negative effect on real estate.

REITs may be subject to policy impacts, with Tuckwood pointing out that the hot multifamily housing sector could struggle under a housing bill limiting institutional ownership. Risks such as those are a reminder to keep allocations small and stay diversified. “We’re not in the game of trying to predict these things. It’s more just about, ‘Hey, here’s an asset class that we think has the potential for some nice returns, and a good place to allocate new capital,’” he said.