Investing in real estate investment trusts (REITs) is one of several ways to get into real estate investing. Although buying a residential rental property is the most popular way, investing in REITs isn't too far behind. As of 2023, REITs in the United States had a market capitalization of $1.3 trillion.
But as a savvy real estate investor, you don't invest simply because a certain asset or market is popular. You need to have compelling reasons why you should invest in REITs.
This article unpacks the major benefits of REIT investing.
Low Capital Requirements
Investing in physical real estate is a capital-intensive undertaking. If you want to invest in a residential rental unit, for example, you'll have to spend a lot of money upfront. The median home price in 2024 Q1 was $410,000, so you get the point.
Even though there are real estate financing options, such as home loans, that make investing in physical real estate easier, investors still need to pay a deposit, which can run into tens of thousands of dollars.
On the other hand, you don't need so much money to invest in REIT. Since you're buying a share of a company that invests in real estate, you don't need so much money to get started. With just $1,000, for example, you can buy a couple of shares in your favorite REIT.
If you are shying away from becoming a real estate investor because you thought you couldn't afford it, REITs offer the ideal opportunity for you.
No Getting Your Hands Dirty
Investing in physical real estate, be it commercial or residential real estate or raw land, involves a lot of physical work. When you're a landlord, for example, you have to be involved in managing the property - unless you outsource your functions to a property management firm, which comes at an additional cost.
If you're a DIY landlord, the commute to and from your rental property can be taxing. Resolving seemingly endless tenant issues can also give you sleepless nights.
If you don't want to do all that hard work without giving up on your dream to invest in real estate, REIT investing is for you.
Investing in a REIT is like investing in the stock market. After you've bought your shares in a REIT, you can sit back and wait for the company to pay out dividends!
High Dividend Yields
If you have to choose between investing in a rental property or a REIT, the deciding factor could be the return on investments. Which yields the best results?
Although there's no clear-cut winner, you can expect to get high dividend yields when you invest in a REIT. This is because REITs are legally mandated to pay out 90% of their taxable income as dividends to investors.
To maximize your dividend income, it's important to invest in high-performing REITs.
Start Investing in Real Estate Investment Trusts
Real estate investment trusts present an ideal opportunity for investors who'd like to diversify their portfolio or earn passive income without doing the work that comes with owning a property. If you're on the fence about REITs, it's time to jump in!
PMI Green County can help you make smart REIT investments. We have highly experienced real estate advisors who will help you choose the best REITs to invest in.
Contact us to schedule a consultation.
