Selling commercial real estate short: A risky business

— -- Q: In my investment club I suggested we sell commercial and industrial real estate short. Is there an ETF that does that, since I don't want to put the money in just one stock?

A: If you take a stroll down many commercial districts, it's easy to see why you might bet against commercial real estate.

Weak consumer demand and a sluggish economy have been brutal for managers of commercial property. Vacancies are up in many cities as strip malls, office buildings and other property go unrented.

Perhaps you're thinking commercial real estate is going to get even worse. That's probably why you're asking about shorting REITs. Shorting is a bet that a stock will fall. Investors short a stock by borrowing shares, selling them and then buying them back at a lower price. You can read more here about shorting stock.

A few words of caution. Remember that REITs pay out a vast majority of their earnings as periodic dividends. Many REIT ETFs are yielding more than 9% annually these days. That means you will be required to cough up those 9% dividends to the party from whom you borrowed the shares while you are shorting the ETF. That's a pretty steep cost when you're speculating.