In this article, we will take a look at the 10 most undervalued REIT stocks to invest in now.
Where is the Real Estate Sector Heading?
According to the National Association of Realtors, sales of previously owned homes in February increased 4.2% from January while they were 1.2% lower year-over-year. Home buyers are slowly moving into the market although mortgage rates have not changed much. Although the market is still tight, it is witnessing more inventory and choices, with the inventory at February end standing at 1.24 million units thereby representing a 17% rise year-over-year. The tight supply is still driving home prices up since the median price of a home sold in the month of February was 3.8% higher, as compared to last year.
Lawrence Yun, NAR’s chief economist, previously appeared on CNBC to give insights on the state of the housing market. In his opinion, if inflation comes down due to deregulation policies despite the tariff conditions or more home construction occurs with the federal government opening up for more development, the market might see lower mortgage rates along with the Fed rate cut. Simultaneously, the Federal Reserve decided to hold the interest rates steady amidst uncertainties around tariffs.
Logan Mohtashami, HousingWire lead analyst, thinks the cure for tariffs is lower mortgage rates. In an interview with CNBC, he said that if mortgage rates go down and new home sales start to grow, the builder would find a way to sell homes and build homes. Although builder sentiment has recently fallen considering their profit margins are stressed amidst tariffs, this sentiment tends to increase with rates going down.
With that being said, let’s move to the 10 most undervalued REIT stocks to invest in now.
An aerial view of multiple modern high-rise commercial buildings, representing the company’s wide-ranging real estate portfolio.
Our Methodology
In order to compile a list of the 10 most undervalued REIT stocks to invest in now, we first used a stock screener to shortlist REIT stocks trading at a forward P/E of less than 15, as of March 25. From this list, we selected the top 10 stocks with the highest number of hedge fund holders, as of Q4 2024. The 10 most undervalued REIT stocks to invest in now have been arranged in ascending order of the number of hedge funds that disclosed stakes in them at the end of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Most Undervalued REIT Stocks to Invest In Now
10. Safehold Inc. (NYSE:SAFE)
Number of Hedge Fund Holders: 15
Forward P/E: 11.49
Safehold Inc. (NYSE:SAFE) is a provider of modern ground leases. The REIT gives investors access to this historically inaccessible asset class since typical owners include universities, high net-worth families, churches, and royalty. Currently, Safehold Inc. (NYSE:SAFE) has a $6.8 billion ground lease portfolio in more than 40 unique markets.
Safehold Inc. (NYSE:SAFE), the market leader of the modern ground lease industry, is the first and only nationally-scaled publicly traded ground lease platform. The REIT strategically targets well-located, institutionally owned commercial real estate with attractive fundamentals diversified across the top 30 US MSAs, which it believes are positioned for long-term sustainable growth. While a relatively sharp rise in interest rates poses headwinds for customers and places upward pressure on discount rates and cap rates used for valuing the REIT’s existing portfolio, the management believes interest rates are an uncontrollable factor. However, the firm is working to counteract the impact of higher rates by increasing its penetration in the multifamily market, especially the affordable sector in 2025 and expanding to at least two new states. New origination activity for the REIT was $225 million in 2024. This includes 10 new ground leases and one leasehold loan while the 10 new ground leases were in the broader multifamily category, comprising of 6 in the affordable housing space.
9. Innovative Industrial Properties, Inc. (NYSE:IIPR)
Number of Hedge Fund Holders: 17
Forward P/E: 13.26
Innovative Industrial Properties, Inc. (NYSE:IIPR) is a leading provider of real estate capital for the regulated cannabis industry. The REIT focuses on the acquisition, ownership, and management of specialized properties leased to state-licensed operators for their regulated cannabis facilities.
Innovative Industrial Properties, Inc. (NYSE:IIPR) is the only NYSE-listed cannabis REIT and hence, offers direct investment exposure to cannabis with the stability of real estate. The REIT is currently witnessing growth prospects in its industry where 40 states and Washington, D.C., have legalized cannabis for medical use, while 24 states and Washington, D.C., have legalized cannabis for adult use as of August 2024. In this environment, the growth opportunity remains promising for the REIT since the expected 2028 US legal cannabis sales forecast is $46 billion, exceeding the 2023 US beer market, spirits market, and wine market. Innovative Industrial Properties, Inc. (NYSE:IIPR) made significant progress in leasing in the full year 2024, executing new leases at 6 properties representing 530,000 square feet. The REIT continued to generate significant revenue from the regulated cannabis industry, posting total revenues of $308.5 million and AFFO of $256.1 million.
