Looking to invest in real estate but don’t have the time to be hands on? Learn how investing in a REIT can be a great addition to your real estate portfolio.
Investing in real estate is not limited to buying a property to rent out or flipping a house. It does not have to be so hands-on. You can invest in real estate without having to worry about finding the perfect tenant for your condo, shelling out money for emergency repair or stressing about managing your investment property. If that sounds like an ideal investment, you need to learn all about REITs.
What are REITs and why are they so popular?
Real estate investment trusts (REITs) are companies that own or finance income-producing commercial and residential properties. Generally speaking, a REIT generates a return based on rental income and distributes it among its investors. The REIT investors receive a monthly dividend depending on a targeted annual percentage. REIT investors also benefit from capital appreciation that is realized through increases in rent, renovation of units or assets and a shift in strategy within the investment portfolio. Their investment is secured by the REITs real estate portfolio. As a result, REITs are most suitable for those seeking to diversify their investment portfolios through passive real estate investing and are considered a good alternative to stocks, bonds and cash.
Public Versus Private REITs
There are two kinds of REITs, public and private REITs. Public REITs are listed on the stock market and are strongly correlated with trends in the stock market, while private REITs’ unit prices depend on the units’ appraised values rather than stock market trends. One example of a private REIT is District REIT, a Canadian REIT that focuses on emerging regions in Southern Ontario.
Whether opting for a public or private REIT, investors are able to take part in the ownership of a real estate portfolio without being burdened with the management or maintenance of properties, assets or tenants. Those looking for a passive investment often choose REITs to enjoy the financial perks of owning real estate without the responsibility associated with the traditional real estate ownership model.
Are REITs right for you?
Choosing the right strategy that works best for your personal investment portfolio is crucial for your financial wellbeing. If you are looking for an investment solution that gives you all the benefits of owning real estate assets without having to put in all the work to buy, finance, manage or maintain properties, investing in a REIT might be a great option for you.