Investing in REITs is as straightforward as opening a brokerage account. It would take just a few minutes, and you would be allowed to buy and sell REITs, just like stocks. REITs pay out enormous dividends. It is, therefore, advisable to use a tax-advantaged account like an IRA that would help you to postpone the distributions.
Notable advantages if you choose to invest in publicly traded REITs
Since REITs pay 90% of the annual income for shareholder dividends, they regularly provide the highest dividend yields in the stock market. Investors who want a consistent income at regular intervals choose reliable REITs because they have a proven track record for decades.
Returns from REITs are relatively more than equity indexes and also help the diversification of the portfolio. Publicly traded REITs can be purchased and sold effortlessly. You can avoid the paperwork and maintenance associated with commercial real estate.
REITs are not as volatile as traditional stocks partly owing to the fact that they pay more enormous dividends. Some investors use REITs for hedging.
While publicly traded REITs are simple to purchase and sell than literal real estate properties, non-traded REITs and private REITs must be patiently held for years to reap gains.
The legal status REITs have an abundant debt. They are always among the majority of indebted companies in the market. Investors, however, don’t face an issue because REITs generally possess long-term contracts (leases) that bring in consistent cash flow to meet out the debt payments and then make sure that dividends would be paid out.
Since REITs pay a bulk of the profits as dividends, they have to increase cash by providing new stock shares and bonds to grow. Moreover, investors would not buy them when there is a financial crisis. Thus, REITs might not be able to purchase real estate whenever they want to.
REITs need not pay taxes, but investors should pay excessive amounts for the dividends they receive; however, a tax-advantaged account could avoid this and is considered an ideal fit for IRAs.
For Non-traded REITs, the cost for initial investment would be $25,000 or more usually restricted to accredited investors with notably higher fees than publicly-traded REITs.
If you decided not to trade individual REIT stocks, you could find exchange-traded funds (ETF) or mutual fund that invests in a range of REITs for you. It is less risky and provides immediate diversification. Today, several brokerages offer them. Moreover, investing in these funds is much simpler than finding individual REITs for investment.
Some online trading platforms that allow you to invest in real estate properties
- iShares U.S. Real Estate ETF
- Fidelity MSCI Real Estate Index ETF
- Invesco Active U.S. Real Estate ETF
- Real Estate Select Sector SPDR Fund
- iShares Cohen and Steers REIT ETF
REIT stocks that perform well
- Safehold Inc.
- Goodman Group
- Innovative Industrial Properties Inc
- Equinix Inc
- Power REIT
Some REIT mutual funds you can consider
- Principal Real Estate Securities Fd R-6
- TIAA-CREF Real Estate Sec Advisor
- PGIM US Real Estate Z
- Cohen & Steers Real Estate Securities Z
- Neuberger Berman Real Estate R6