How to Invest in REITs

Increased interest in alternative investments is taking the financial world by storm, and real estate investment trusts (REITs) continue to rise in popularity. As crowdfunding platforms like Yieldstreet have emerged as promising options for investors seeking returns in asset classes outside of the stock market, REITs can also offer unique advantages for investors. But what exactly are REITs, what are the advantages, and how can even the most novice investors get involved in this exciting trend? 

While no two funds are the same, the principle behind their investment strategy is consistent and straightforward: REITs are companies that own real estate property known to produce regular income, whether it's a shopping mall, apartment, or storage facility. By investing in one or more of these companies, portions of the income produced come back in the form of returns and dividends. But what makes REITs such an attractive option, and different from other real estate investments, is that their abidance by a set of IRS standards allows them to avoid corporate tax requirements, making them conducive to increasing return rates and dividend payouts. 

The operational model of a REIT is often structured around equity, mortgages, or some combination of the two (hybrid REITs). Equity REITs own and manage the associated properties, functioning almost the same as a landlord, maintaining and investing in the property while collecting scheduled rent payments. A mortgage REIT, by contrast, takes ownership of debt securities rather than the property itself, deriving its profits from mortgages typically acquired from the original lender. Although all REITs are known for producing impressive returns and significant growth on dividends, mortgage and hybrid models tend to have a wider breadth of associated risks. (As with any investment, it's critical to familiarize yourself with an individual fund's holdings and the underlying strategy before investing.) 

Investment Options

Publicly traded REITs - There are hundreds of publicly traded REITs available, which can be purchased with little to no difficulty via traditional brokerage accounts or online platforms such as Robinhood. Publicly traded REITs have a great risk profile due to their liquidity and visibility, and the most popularly traded funds in this category can produce surprising annual returns. 

ETFs - REIT exchange-traded funds (ETFs) can be traded just as easily as publicly traded REITs, but rather than consisting of shares of an individual company, ETFs usually contain assets spread across multiple equity REIT securities and derivatives. With relatively low minimum investment requirements, investing in ETFs can be a great way to add diversity to your portfolio. 

Crowdfunding Platforms - Novel crowdfunding investment platforms like Yieldstreet provide the perfect introduction to REITs and commercial real estate opportunities. Yieldstreet provides access to a wide range of diversified asset funds to accommodate the seasoned trader as well as those looking to invest as little as $500 with no accreditation required. It's as simple as signing up, taking a short quiz, and being served a personalized menu of alternative investment opportunities.

Source: Yieldstreet

Share:


Categories: Personal and Family Finances

Tags: Finance, Investments, Real Estate Investment, REIT