Identifying Risks in Real Estate Investment Trusts

Easy Real Estate Investment Risk Considerations

John is considering investing in a real estate investment trust (REIT) but is concerned about various risks associated with this type of investment. He understands that investing in real estate can be significantly different from investing in traditional equities. He seeks to identify the primary risk that can impact his investment returns in a REIT.

Which of the following risks should John be most concerned about when investing in a REIT?

Interest rate risk, as rising rates can lead to higher borrowing costs and decrease property values.

Currency risk, since he is investing in a domestic REIT.

Operational risk, which includes the risk of management decisions affecting property performance.

Hint

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