REITs have become rather popular among investors looking to diversify their portfolios. These provide an easier way to gain exposure to real estate than purchasing a property. However, not everyone understands what they are or how they work. Here are a few tips to help you gain a better understanding of them.
What Is a REIT?
First, let’s talk about what REITs are. They’re companies that have invested in real estate, and you can purchase shares of them. Companies must invest three-quarters of their assets into real estate to be a REIT.
Also, they’ve got to earn three-quarters of their revenues from rents and mortgages. Finally, they must pay out 90% of their income in the form of dividends. That means if you invest in them you’ll get a share of whatever revenue they’re bringing in.
What Are the Benefits of Investing in REITs?
Now that we know what these things are, we can discuss why they’re good investments. Above all, investing in REITs provides an easy way to expose your portfolio to the real estate sector.
Traditionally, the only way to do that before would have been to purchase properties. Doing that tends to require large amounts of capital to invest, though. So, not many people could benefit from real estate investments. However, by investing in them, you’ll begin exposing yourself to the real estate sector.
Second, these tend to pay out pretty large dividends. Dividends are a form of payment sent to investors by a company. Usually, they’ll send them out every 3 months. People looking to create passive income should consider investing in REITs.
How to Invest in Them
Investing in REITs is as simple as purchasing any other stock. Simply research your preferred shares. Then, you can submit a purchase order for them. There are a ton of ETFs that also have REITs as part of their portfolios. Once you’ve purchased your shares, you can sit back while collecting dividend payments.
Investing in REITs for Beginners
If you’ve been looking to invest in real estate, REITs offer an easy way for anyone to get involved. Still, don’t invest more in them than you can afford to lose. While they’re typical stable investments, they can be a little volatile at times.