According to JPMorgan Chase, about 170 million Americans are currently invested in REITs.
Real estate investment trusts (REITs) are an asset that more people are investing in due to the various benefits they offer. It's a good approach to diversify your investment portfolio, and adding REITs can help with this. They're a great option for people who want to make real estate investments without buying entire properties.
So what exactly are REITs, and why should you consider investing in them? Keep reading to find out.
What Are Real Estate Investment Trusts (REITs)
REITs are companies that own, operate, or finance income-generating real estate assets. These generally cover a range of property sectors, and those who invest in these companies can earn from the real estate without having to own it directly.
REITs began in the 1960s as a way for investors to add real estate stock options to their portfolios. They're very accessible compared to traditional real estate which has contributed to their increased popularity.
REIT Investment Benefits
Regardless of any other investments you own, REITs can be a great addition to your real estate portfolio. They offer several key benefits that are worth considering.
Portfolio Diversification
A diversified investment portfolio is ideal. It will help protect you from potentially damaging market events that could be very bad for investors who only focus on a single type of asset. Adding REITs to your portfolio can help you manage your risk, which is something all investors should do.
Ease of Access
Of all the asset classes someone can invest in, real estate is typically one of the most difficult to access. Properties are large investments and are completely out of reach for a lot of people.
With REITs, you can essentially invest in a small portion of a property for a much lower price. This is a great way for someone who doesn't have much capital to add real estate to their portfolio.
Minimal Work Needed
If you purchase a property, you can make a good income, but it takes some work. You'll need to consider tasks like:
- Marketing
- Maintenance and repairs
- Tenant screening
- Accounting
- Administration
Property management can turn into a full-time job, and this isn't ideal for some investors. A REIT is responsible for all property management, so if you invest in one, you can enjoy the income without having to worry about the management side of things.
Potential for Higher Yield
When compared to common equities, REITs often pay higher dividends. The passive income from REITs can be well worth the investment, allowing you to move closer to your goals.
Are REITs Right for You?
With any investment, there are benefits and potential drawbacks. You should consider your current position alongside your investment goals to determine if real estate investment trusts (REITs) are right for you. Adding other investments (such as traditional real estate) to your portfolio can also prove very beneficial, but it takes a lot of work.
Hiring a reliable property management company like PMI Metroplex Properties can help you get the most out of your investments. Our experienced team can use the latest technology to help you achieve your investment goals. Take a look at our property management page to find out more.
