If you're interested in long-term ventures or want to diversify your investment strategies, real estate investment trusts (REITs) could be an ideal choice. These allow you to invest in real estate without buying any property directly.
REITs accounted for about $4.5 trillion worth of assets worldwide, based on a 2023 article by CNBC. The popularity of these investments is growing, and many people are choosing them over traditional ownership.
Are you wondering whether you should add REITs to your portfolio? Continue reading to learn more about them and their benefits.
What Are Real Estate Investment Trusts (REITs)?
REITs are companies owning, running, or financing real estate investments for income. They profit by selling some properties or collecting rent from tenants, then use part of the funds to pay dividends.
For a firm to qualify as a REIT, it must make at least 95% of its gross income from the following:
- Rent from real property
- Dividends
- Interests
- Income from the sale of a property
REITs often focus on residential properties such as condos, single-family homes, and apartments. They also invest in commercial spaces used as warehouses, malls, and office spaces. Some REITs specialize in healthcare by investing in clinics, assisted living communities, and hospitals.
The Benefits of REITs
The most notable REIT benefits include:
- Easy access to real estate income
- Affordability
- Liquidity
With REITs, you don't have to buy an entire building or property to start earning from real estate. Instead, you can purchase shares and earn dividends based on the company's income. The investment allows you to reap the benefits of real estate without managing a property.
Investing in real estate often requires a lot of money, so you may need to save or get a loan. However, you don't need a huge amount with REITs since you can buy shares with a much smaller investment. These firms make real estate more affordable for investors with different budgets.
Buying and selling property in traditional real estate can take several months. But since REITs are traded on the stock market, you can quickly buy or sell shares to meet your financial needs.
Reasons to Add REITs to your Portfolio
Properties perform differently under varying market conditions, and diversifying investments with REITs allows you to spread risks.
You'll also enjoy better protection from inflation because the company will increase rent when the cost of living rises. The increased profits will allow you to maintain the purchasing power of your income.
Another reason to consider real estate investing with REITs is their growth potential. Many companies venture into new developments to boost profits and make strategic property investments in hot real estate markets. Purchasing REIT shares can ensure a steady income and significant portfolio growth.
Gain Real Estate Insights With PMI Gatekeeper Realty Services
Real estate investment trusts (REITs) allow you to grow wealth and earn a steady income. They also protect your finances from inflation and help you enjoy the benefits of owning property without essentially being a landlord.
PMI Gatekeeper Realty Services has experts to help you make smart real estate decisions. We will review your financial goals and current portfolio to advise if REITs are a good addition.
Further, we can recommend other real estate investments suitable for your needs and risk tolerance. Contact us for a consultation.
