Investing in real estate is a great choice when looking to build equity or a fixed-income portfolio. One key way to diversify and possibly make higher returns on your investment is by investing in real estate investment trusts, otherwise known as REITs.
How to Invest in REITs
A REIT is a company that owns and likely operates income-producing real estate. The real estate properties that they own and operate come in all forms, but they all have a business model. Whether it’s investing in the commercial real estate property itself or the mortgage of the property, you can still generate income.
About a quarter of all REITs are in malls or free-stand retail, making it the largest type of investment in the United States. If you’re thinking about investing in retail property, you need to know whether the retail industry is healthy at the moment. Are people buying right now? Is the economy doing well? Is this property desirable?
Multi-family homes and apartments as well as manufactured housing are also profitable with a number of factors involved. The best areas to invest in residential REITS are where home ownership is relatively low, like New York, Los Angeles, or other large, urban centers.
In order to determine a good area to invest, look at employment and job growth. Are people flocking to that city in particularly, or are they looking for a way out? You’re looking for high demands and low vacancy, that way you can afford to charge more in rent.
As Americans age, healthcare is becoming more important than ever. Hospitals, medical centers, nursing homes, retirement facilities, and other healthcare real estate properties are very lucrative properties as long as healthcare funding remains in effect. When healthcare costs increase, vacancy is high. And while many Americans may be sick or aging, they may not be as inclined to seek treatment.
Those who invest in office REITs receive income from businesses that move in and sign long-term leases. Be sure to evaluate the company and industry’s employment rates, vacancies, acquisitions, and value overall.
How to invest in a REIT
You can easily purchase a REIT through real estate partners or brokers. Publicly traded REITs are listed on the stock exchange.
If you have other questions about how to invest in REITs, contact your financial advisor or stock broker.