One of the key reasons it can be a good idea to consider buying NNN REIT (triple-net lease real estate investment trusts) before the Federal Reserve begins cutting interest rates is tied to how the market prices these securities relative to interest rate expectations.
When interest rates are elevated, REITs—especially those focused on predictable, long-term leases like NNN REIT—often trade at discounted valuations. That’s because their dividend yields are compared directly to safer alternatives like Treasury bonds and money market funds, which look more attractive when short-term yields are high. Investors tend to rotate away from REITs during periods of rising or high rates, pushing their prices down. But this can create opportunities: the underlying businesses of NNN REITs usually remain steady, since their tenants are locked into multi-decade leases that pass property expenses (taxes, insurance, maintenance) directly on to the tenant. Essentially, their cash flow is resilient even while market sentiment is pressured.
Once rate cuts begin, the calculus changes. Lower rates typically reduce the relative appeal of bonds and savings instruments, sending income-focused investors searching for yield elsewhere. NNN REITs, with their history of stable and growing dividends, naturally become more attractive in that environment. At the same time, lower borrowing costs improve the REIT’s ability to refinance debt on better terms and pursue accretive acquisitions, both of which can boost long-term earnings growth.
