Usually, low interest rate are good for most REITs and bad for most BDCs. When rate starts rising, it would be bad for most REITs and good for most BDCs especially those that have a lot of floating rate loans, such as PSEC and FSC. Also, most REITs use a lot of leverage while BDCs are only allowed a 1:1 debt equity ratio (their SBA loan amounts can be exempt from the calculation of this ratio). In that regard, while GARS (a small BDC with a market cap of 241.7M) currently only has a 9.75% yield but its NAV has been steadily increased and would reach 15.61 or higher when they announce their next earnings on Aug. 6. It will be able to obtain a 10 year low fixed rate loan of 150M from its first SBIC license soon and another 75M from its second license. In short, it would almost double its current market cap of 241.7M. It is almost impossible for them not to increase their future earnings. Its price currently dropped to 14.42 only because they had issued 2M new shares on 7/17/14 at 14.50. At its current price, at about 0.93 of its recent NAV, IMHO, is extremely undervalued and any wise investors should start a half position at around 14.40 and buy the other half after it announces its next earnings on 8/6/14. Its 12-mo target value, IMHO, is at least $15.
My advice is to have a balanced portfolio with both good REITs (CYS, PMT, TWO, NRF...) and good BDCs (FSC, PSEC, GAIN, AINV, ARCC, GARS, MRCC, FSFR, ASCF...). Of course buying them at the right prices will be critical.