Investing in real estate does not only have to do with buying a property for personal use or management. There are a whole lot of methods to become a real estate investor and have your investment managed by another party.
In this blog post, you will learn about real estate investment trust, types and its benefits.
What are Real Estate Investment Trusts ?
These are companies that buy, own, manage and operate real estate properties that generate income on behalf of its investors. The returns on these real estate properties are distributed to shareholders as dividends.
This form of investment is good for investors who want regular income but do not have time to manage their investment portfolio. They invest in different real estate properties like office buildings, retail spaces, industrial properties with REITs and receive regular dividends. Investors can invest by purchasing shares of REIT companies on stock exchange or through mutual funds or exchange-traded funds (ETFs).
Types of Real Estate Investment Trusts (REITs).
- Equity REITs: These real estate investment trusts (companies) own and operate income-producing real estate properties to generate income from rental income, property appreciation, and other investment sources.
- Mortgage REITs: These REITs give out mortgage loans, mortgage-backed securities, and other real estate debt instruments as an investment and earn returns on them from interest
- Hybrid REITs: These REITs combine the characteristics of equity and mortgage REITs. They invest in both real estate properties and real estate debt.
Benefits of Investing in REITs
- Diversification: REITs offer a way to diversify investment portfolios beyond regular stocks and bonds to hedge against financial inflation.
- Income Generation: REITs typically distribute a significant portion of its income as dividends to provide a regular income stream to investors.
- Professional Management: Investors are free from the management responsibility of their investments. They are managed by professional teams with expertise in real estate management and investment.
- Liquidity: REITs are traded on stock exchanges, making them relatively liquid compared to direct real estate investments.
Risks of Investing in REITs
- Interest rate risk: The increase in borrowing costs for property owners caused by rising interest rates can negatively impact REITs.
- Economic risk: Economic downturns can reduce demand for real estate which can affect property values and rental income.
- Management risk: The performance of a REIT depends on the skill and experience of its management team. This means that its value can be affected by the performance of its underlying properties. A decline in the value of a specific property can impact the overall value of the REIT.
Conclusion
Real estate investment trusts (REITs) is an opportunity to invest in real estate without the need for direct property ownership. At Sterling Homes Limited, our commitment to quality, customer satisfaction ensures that we provide clients with the best tips on their real estate investment deals.
Whether you are searching for your first home, a family residence, or an investment property, our team of experts is here to guide you every step of the way. Visit our website to view our listings of available properties and also read up on more helpful real estate resources.