Real Estate Investment Trust 101
Real estate investment trusts are a companies that owns, operates, or finances properties. The properties can range from homes to hotels, malls, offices, medical buildings, or any other real estate type.
Investing in REITs can be a great way to generate passive income and build wealth through real estate. Perhaps that is why nine out of 10 investors add real estate to their investment portfolio. If you want to diversify where you put your money to grow it steadily over time, you can buy shares of a REIT.
Of course, you might be thinking that your portfolio is already diverse, with a mix of stocks and bonds. Why add REITs into the mix? There are several reasons.
REITs Can Be Affordable Ways to Get Into Real Estate Investing
Let’s say you want to invest in real estate. That’s a great goal, but it might take a lot of capital to get started and purchase a property substantial enough to generate cash flow. After all, if you are only beginning your real estate investing career, you’re probably going to purchase just one property at a time.
Rather than wait until you have enough property to start seeing regular returns, you can use an app for investing in commercial real estate and jump right into the REIT world. No-fuss, no muss, and it’s economical, too.
REITs Can Generate Steady Income Streams
As you may have heard, real estate tends to outperform the stock market over the long-run. A real estate investment trust often provides dividend distributions, that can then be reinvested through dividend reinvestment plans (DRIPs). By reinvesting your dividends back into the REIT, you are purchasing more shares of the REIT. That increases you future potential dividend payouts.
When it comes time to start reaping the benefits of your investment, you could potentially realize a significant stream of income. And that’s good for your retirement years.
The Stock Market Has Less Effect on Public Non-Listed Real Estate Investment Trusts
Are you concerned about stock market volatility when it comes to distributing and managing your investment portfolio? Public non-traded REITs tend to fluctuate in value less than other publicly traded REITs and stocks when the market takes a tumble.
Although no investment is entirely immune to market swings, public non-traded REITs are more closely aligned with a pure-play real estate investment and can be less volatile. If your risk profile leans toward taking fewer chances, download one of the best investing apps and look into a public non-listed REIT.
Professional Management Teams Oversee the Commercial Real Estate
Let’s say your friend tells you he’s buying up tons of commercial property for sale in the area and wants you to be an investor.
Sounds good–in theory.
In practice, your arrangement could end up a nightmare, especially if your buddy isn’t a smart money or property manager.
Real estate professionals manage REITs. This means that they’ll treat your investment like you would, with care and diligence.
The SEC Has Oversight of All Types of REITs
If you choose to invest in a publicly traded or public non-traded REIT, you have the SEC overseeing financials of the REIT. In other words, you don’t have to wonder if the REITs are in compliance. They must legally follow SEC regulations. If they don’t, they risk losing their REIT status and could run into legal trouble. This provides you with security that you may not get investing in private equity or a private REIT.
Your desire to invest in real estate, even if you can only invest in real estate with $500 or less, makes sense. Over the past 20 years, Real estate investment trusts have proven to be the right fit for investors of all ages, from Generation Z to Baby Boomers. Download a real estate investing app today and have fun exploring the wide world of REITs.
For a more in-depth article on the details of real estate investment trusts, read more here.
