It was two o’clock in the morning on November 5. Yet those of us gathered at Mar-a-Lago were anything but tired.

We’d been told for months that it could take weeks – maybe more – to determine the outcome of the presidential election. Yet there we were, mere hours after polls shut down across the country… watching one state after another turn undeniably red.

The next president of the United States was going to be Donald Trump again.

Nine weeks later, I don’t remember everything he said when he came out to make his victory speech. But these lines stood out to me intensely:

And with every breath in my body, I will not rest until we have delivered the strong, safe, and prosperous America that our children deserve and that you deserve. This will truly be the golden age of America.

As a father, I’m all about that sentiment becoming a reality. And I obviously wouldn’t mind it for myself as well.

Today, however, I want to explain how Trump’s pro-American policies can help real estate investment trusts, or REITs. It’s a sector that’s been struggling immensely in market perception…

So much so that I get readers asking me why they should bother investing in REITs at all.

I don’t mind the question. But I know my answers about the sector’s reliable dividends, strong balance sheets, and historical growth aren’t always convincing.

Not when REIT stock prices haven’t reflected any such thing in years. Yet, even knowing that some of you might roll your eyes, I can’t bring myself not to tell you that I believe REITs will benefit enormously from the upcoming “Golden Age.”

Let me tell you why.

Trump’s Tariffs Will Open Up Real Estate Opportunities

We’ve all heard the horror predictions about Trump’s tariff proposals: how a broad 10% to 20% – and a 60% tariff on Chinese imports – will cause inflation to skyrocket.

But first of all, as I’ve said before, I believe he’s partially using those figures as international bargaining tools. He did, after all, write The Art of the Deal, which included tips about asking for more than you expect in order to get the best contract possible.

So while I do expect there to be tariffs, I don’t expect them to be so onerous. And, long term, I expect them to be exceptionally beneficial to the American people.

That’s because they’re going to make it more difficult for American companies to outsource their operations. No longer will it be so cheap to have call centers, plants, factories, and other assets outside of these United States.

Between Trump’s tariffs and incentives – like additional tax breaks for companies that establish or move their businesses back here – I believe corporations will line up to build facilities on American soil. Both foreign and domestic, for the record.

All told, Trump’s carrot-and-stick plan could lead to an enormous U.S. expansion. To quote Pershing Square founder and CEO Bill Ackman, “With China’s economy faltering and Europe in disarray, the U.S. stands out as the prime destination for investment… Growth is on the brink of a massive uptick.”

There are some REITS that could experience short- and even mid-term pain as this all gets worked out. But a much wider range, including Realty Income (O), W.P. Carey (WPC), STAG Industrial (STAG), and EastGroup Properties (EGP), should be able to capitalize fairly quickly.

The more corporate customers look for factories, warehouses, and stores here in the U.S., the more landlords will benefit.

DOGE: Making the Government Efficient Will Have Enormous Effects

Vivek Ramaswamy and Elon Musk will be running the Department of Government Efficiency (“DOGE”). Their goal: to “drive large-scale structural reform and create an entrepreneurial approach to government never seen before.”

In other words, say bye-bye to unnecessary bureaucratic positions, spending, and red tape.

Musk, for his part, believes he can slash $2 trillion from our $6.75 trillion budget by simply dismantling thousands of federal regulations. I know that makes some people nervous, but they probably have no idea how many rules have been made for no practical purpose.

As a private developer for over two decades, I’ve seen how pointlessly restrictive they can be… 20 years ago. There are far more (and far more many) ridiculous burdens on the books today.

Zachary Liscow, a Yale professor of law, recently wrote in a white paper how:

… there are too many government procedures and too much litigation. While efforts like the National Environmental Policy Act have the laudable goals of protecting the environment and disadvantaged groups, they are too burdensome today.

It now takes over four years to prepare the average environmental impact statement. And these tools are now often used to protect the interests of wealthy landowners. Procurement rules are often very cumbersome for the private sector to comply with, limiting competition and driving up costs.

These kinds of environmental reports factor heavily into construction permits. So when you get rid of unnecessary complications, it’s going to make building new real estate much cheaper.

Which REITs can and will obviously benefit from.

Tax Cuts: The ‘Hidden Benefit’

It might not seem as if tax cuts will make much of a difference to REITs. After all, they pay no corporate taxes just as long as they pay out at least 90% of their taxable income to investors by way of dividends.

But that doesn’t mean they can’t still reap the rewards of Trump’s policies.

The last time he was in office, he championed the Tax Cut and Jobs Act, which was designed to reduce the burden on businesses and workers alike. Under the law, individual tax cuts were supposed to expire this year and corporate ones in 2028.

But Trump will almost undoubtedly extend both now. In which case, many American companies will get to keep more money.

I understand how that might sound like a negative at first glance. And, yes, some corporations care much more about their bottom line than their customers.

Then again, consider how many companies have gone or are going out of business in the past five years – both big and small. Just last year alone, Big Lots, BowFlex, Express, Joann, LL Flooring, Party City, Red Lobster, and Spirit Airlines all filed for bankruptcy.

How many of them were REIT tenants?

Admittedly, REITs do tend to buy up property in the best locations possible. This makes them less likely to lose tenants to bankruptcy.

But it still does happen, so consider how much better off they would be if their clients had more money due to lower taxes. That would mean more consistent rent checks to REITs.

And, therefore, more stable and growing dividends for their investors.

One Problem to Be Aware Of

There is, admittedly, one factor that could keep the upcoming Golden Age from being quite so shiny for REITs.

That would be interest rates.

As you undoubtedly know, the Federal Reserve lowered its key interest rate last month from 4.5% to 4.25%. Then it turned cautious.

Unlike the previous two cuts in 2024, Fed Chair Jerome Powell issued much more guarded remarks about his economic analysis. He let everyone know quite clearly that the Fed is pulling on the reigns.

As such, the markets now expect interest rates to sit at about 3.9% by the end of the year.

Considering how badly interest rates have impacted investor perception of REITs up until now, I see no reason to think that will drastically change, no matter how “golden” the larger economy turns. So we will have to wait and see on that front.

All the same, interest rates have come down. And they are likely to fall further in 2025. Probably not right away, but they should fall, nonetheless.

In which case, investors should let REITs out of the doghouse, allowing them to fully benefit from Trump’s tariffs, DOGE efforts, and tax cuts.

As will their investors.

Regards,

Brad Thomas
Editor, Wide Moat Daily

MAILBAG

Do you agree with Brad that REITs will benefit under Trump’s second term? Do you have more questions about REITs? Write us at [email protected].