New To REIT Investing? Here’s Everything You Need To Know

 Is buying a property physically the only way to invest in real estate? Not at all! REITs, short for Real Estate Investment Trusts, allow you to make the property market a part of your investment portfolio without having to go through the hassle of procuring the estate physically. REIT investing is one of the best ways to diversify your portfolio without any additional hassle.

Wondering what is ? Read on to find out –





What are REITs and what are their different types?

REITs are investment trusts that pool capital from multiple investors and invest the same in various types of money-making real-estate properties. They are compelled by the law to give away a minimum of 90% of their taxable income as dividends. This makes them one of the most stable and consistent return-generating investment assets available in the market today.

They are required to invest at least 75% of their total assets in real estate and derive the majority of their income by either operating, acquiring, or financing properties. This makes it easy for them to be classified into the following three categories -

1) Mortgage-based REITs

These are the type of REITs that earn their profits by providing loans for developing . The difference between the interest rate amount of the loan and the cost of financing the same is the total revenue earned by the mortgage REIT. As a consequence of this, they are highly sensitive to interest rate changes. The higher the interest rate, the more it will cost the borrower to procure a loan, and as a result, the less interested he/she will be in incurring that debt.

2) Equity-based REITs

Equity-based  allows you to access the investment portfolio that primarily earns its revenue through rents. These types of REITs are usually in the business of leasing out commercial or residential properties to trustable tenants for a certain period of time. The risks involved in investing in them are gauged by analyzing the market trends of the property type they primarily invest in.

3) Hybrid REITs

REITs that make their money by owning real estate properties and by providing loans for the same are called hybrid REITs. They smartly manage their asset allocation between the two investment strategies in order to provide high returns.





What are the advantages of investing in a REIT?

Except for the stable source of income they provide in the forms of dividends, there are a lot of advantages of investing in a REIT, such as -

1) They are highly liquid investment options

Unlike buying/selling properties physically, REIT investing is highly liquid in nature. They allow you to withdraw or deposit your capital quite swiftly and too in your convenient time frame.

2) They are efficient diversification tools

Apart from helping you make real estate a part of your portfolio quite conveniently, REIT investing also gives you exposure to various kinds of properties, i.e., commercial, residential, medical, educational, etc.

We hope this article helps you understand REIT investing better and enlightens you about the advantages of the same.

Please Read The Original Post Here : New To REIT Investing? Here’s Everything You Need To Know





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