Real estate investment trusts or REITs are a way to own shares of a development or stock in a company that builds, rehabs, develops or otherwise invests in real estate. Here are three reasons you should consider investing in REITs and the benefits of investing in REITs over other investment opportunities.
There is a joke that the word for liquidity in real estate is cheap. If someone needs money right now, the house or apartment complex sells for 30% or less than the market value because real estate isn’t a liquid investment. It takes time to find buyers who will pay what the market can bear. One of the biggest benefits of investing in a real estate investment trust is that you can easily sell shares of the REIT, just as you could stocks or bonds. If you suddenly need the money, you can access all or part of it.
Real estate investment trusts in the United States are required to pay out around 90% – at a minimum – of their taxable income to shareholders. This means that you’ll see significant cash flow from your REIT shares. And this cash flow is comparable to profits you’d see if you owned a fractional share of the apartment complex or shopping center, without the inconvenience of actually managing the property. A REIT often pays a higher percentage of its value in dividends than the best dividend paying stocks, and they are sometimes available at a lower cost per share than shares of the biggest businesses.
One factor many fail to consider about real estate investment trusts is the sheer variety of properties they invest in and the diversity of the holdings within any individual REIT. For example, a REIT may own 200 houses that it rehabs and rents out, selling some as they become too costly to maintain and buying others. Or, it owns several apartment buildings in a geographic area. The risk to the investor is far lower than if they owned one rental house or a share of one apartment complex; they don’t have to worry about the investment going down in value because one property burns down or the area goes bad.
Another benefit of REITs is that you can use them to diversify your portfolio. You can buy real estate investment trusts that own commercial property, residential property, industrial estates or agricultural land. You can invest in very specific sectors like medical commercial real estate or nursing home construction. You’ll enjoy cash flow and capital gains from those properties as they appreciate while tapping into a sector you may not have the money to invest in personally. You can find information on your options in investing in real estate investment trusts at investingpr.com.
REITs have many advantages that make them popular with many investors. Real estate investment trusts are as liquid as other traded investments and they provide decent cash flow. They allow you to invest in any real estate niche or broad market sectors like residential real estate. REITs are more stable than stock market investments and the diversified investments of any single REIT make it safer than investing in a single real estate project or owning rental property yourself.