In the past decade, real estate investment trusts have become a popular way to invest money. The main advantage for investors is that they can own real estate without the need to manage it. Thanks to REITs, everyone can get a stake from a property. What’s more, this will make you part of an operating business that may bring you profit.
Perhaps, many have been wondering whether real estate investing will provide high dividends. Since REITs are total return investments, they may make you even more money than you’ve expected. Indeed, they have to deliver at least 90 per cent of their income to their shareholders every year. That’s why they’re perfect for both retirement savers and retirees. Here are some of the more prominent advantages of real estate investment:
Professional Property Management
Undoubtedly, the most significant advantage of investing in REITs is the average investor’s own commercial real estate. What’s more, you don’t have to be knowledgeable on the matter. Proper real estate investment will relieve you of the headaches of ordinary landlords. Ultimately, you’ll have professionals make money for you through marketing, rent collection, tenant management, etc. All you will do is collect your dividends regularly.
Liquidity
Another crucial advantage to bear in mind is the liquidity that comes with real estate investing. Even though cashing out on a real estate investment may take weeks, it will provide great returns. Luckily, the REIT securities are up for trading just like corporative shares. This feature gives investors a crucial advantage in liquidity, which is impossible without Real Estate Investment Trusts.
Diversification
Typically, real estate investing requires a considerable financial resource on the buyer’s behalf. This drawback often forces investors to limit their moves. Consequently, they expose themselves to the risks of micro markets. If you have even fair experience in investing, you’ll know that betting on one market isn’t the best for you. For this reason, many people believe real estate investment to be a risky job.
Luckily, this is not the case with REITs. With the help of Real Estate Investment Trusts, this problem won’t haunt buyers anymore. Since these companies own a wide range of properties in different markets, they offer plenty of diversification. That way, buyers won’t risk it all in one take. Consequently, they can own apartments, condos, offices, etc. and use them in various markets without the risks of micro markets.
Freedom
As expected, REITs also provide lots of options to individual investors. While some trusts invest exclusively in equity, others offer debt-based investment opportunities. In other words, you’re free to choose between the outright purchase of properties and loaning out money to real estate developers.
Of course, both approaches come with their perks and downsides. For example, leaning on gains from cash flows and capital appreciation may be subject to vagaries on the market. On the other hand, relying on debt-based real estate investment may bring in fixed but lower income. That’s why it may be a better idea to buy a combination of both types of REITs. This opportunity will give you the risk-reward portfolio everyone wants to own.
Low Volatility and Low Correlation
One thing that makes REITs stand out from the crowd is that the underlying investment is in real estate. As such, this asset class has quite a predictable rate of appreciation. Thanks to this feature of rental income and management expenses, REITs enjoy low volatility share prices. This advantage makes them much safer than equity stocks because they’re easier to monitor over the short and long term. What’s more, analysts can quickly provide accurate predictions regarding the performance of a real estate investment trust.
Another critical advantage of REITs is the low correlation when it comes to other asset classes. In this regard, it’s safe to say that this category is different from standard equity stocks and bonds. Consequently, the low correlation to equity stocks and investment classes is convenient for investors looking for portfolio diversification. In turn, real estate investment trusts usually perform better when stock prices are down. That way, they’ll balance the performance of your portfolio without effort.
Final Words
Finally, it’s safe to say that REITs are a great way to diversify one’s investment portfolio. When you weigh down all your options, it’s as bright as a day that real estate investing is worth the risk. Of course, there are some pros and cons, but you’ll come out on top with the right mindset and preparation.
Trusting a professional real estate investment company like Real Vantage will take you a long way. All you have to do is set realistic expectations and research the topic and come prepared to win big. You can learn more about real estate investing on the company’s website – https://www.realvantage.co/insights/an-overview-of-investing-in-reits-in-singapore. The platform will provide valuable insight into the current state of the market. Consequently, you’ll make your first steps in real estate investing firmly and securely.
