The lure of buying REITs right now is obvious. Interest rates are at historical lows and continue to fall. Keep pumping fiscal and monetary stimulus into the system, and what do you expect, inflation?

Ask Japan how that's worked out for it.

Nope, there is something amiss in global capitalism, and it won't be corrected anytime soon. So investors looking for high-yield investments are turning to REITs. Traditional income-producing investments like bonds offer little in return. Soon, an investor will have to pay a premium just to get principal back. Those negative interest rates could be coming soon.

That's clearly a big part of why high-yield REITs are in such high demand. But picking any REIT based on yield alone is not a winning strategy. Not all REITs are created equal. In fact, there are certain REITs investors should be avoiding entirely. A high yield is not a good payoff if the REIT is extremely risky.

While REITs have significantly outperformed the market over the last 20 years in terms of total performance and yield, several individual REITs have underperformed. Obviously, we want to avoid those. These losing investments often have misaligned management teams, an overuse of debt, or simple obsolescence.

Another red flag would be the REIT spin-off. Companies selling off the REIT may be doing so for a good reason.

Avoid all of these red flags.

Today, we'll show you three of the most popular REITs on the market – and why they should be avoided at all costs.

REITs to Avoid Now, No. 3

One would think a REIT paying a 6.75% yield would be an attractive investment. That is not the case with Senior Housing Properties Trust (NASDAQ: SNH).

Over the last five years, Senior Housing shares have traded in one direction: down. That might be surprising, considering the market for senior living facilities during that period has exploded. Something is clearly amiss with Senior Housing.

Analysts expect the company to essentially break even in the current year. In 2020, there is an expectation for a jump in revenue and profits.

My bet is the company is trying to generate higher fees in the near term. That strategy may be wise at the beginning of a cycle, but it could be disastrous at the end of the cycle.

I'm not sold.

The long term trend here is down. And this won't end well if the cycle does indeed come to an end soon. Avoid Senior Housing immediately.

REITs to Avoid Now, No. 2

The decline in the retail sector has been swift and painful. Perhaps Real Estate giant Simon Property Group knew something bad was coming when it spun off Washington Prime Group Inc. (NYSE: WPG) five years ago at almost $20 per share.

Today, you can buy Washington Prime Group for $3.83 per share.

I feel bad for those investors buying now, after seeing the insane 25% dividend yield being paid by the company today. It's not going to end well.

Washington Prime is bleeding money, with losses that are expected to last for the foreseeable future. The company is expected to lose $0.38 per share in 2020 after a loss of $0.25 per share in 2019.

A glance at the portfolio of properties owned by Washington Prime explains why. These are some of the junkiest malls in existence today.

To its credit, Washington Prime is attempting to transform those properties to viable hybrid malls with various mixed uses. But it's too little too late.

Huge financial losses will make it difficult to execute that strategy going forward.

This is one REIT I would avoid immediately.

REITs to Avoid Now, No. 1

On the surface, all appears well with Community Healthcare Trust Inc. (NYSE: CHCT).

The company is in the sweet spot of the REIT space, owning healthcare facilities across the country. With an aging demographic, the healthcare market promises riches to come for the next several years.

Unfortunately, the big gains have already been had at Community Health. The stock has climbed over 120% in the last five years, but it's not sustainable growth. The valuation is the problem for investors considering buying today.

At the end of the first quarter, 2019 Community Health traded at a near 60% premium to its net asset value. Most REIT investors prefer that ratio to be at 20% or less.

With a small dividend of 3.78% and a rich valuation, there is nothing to get excited about owning Community Health today. Certainly there is nothing imminent here, but the risk of decline is too high.

There are better REIT options out there.