Real estate investors bought more than 80,000 homes in Q4 of 2021.
The real estate market can be a great one to get into, but it's not easy for everyone. For those who don't have the cash to start buying properties, there are other options. One of the most popular solutions is REIT investing.
So what is a REIT, and should you invest in one? Keep reading to find out.
What Is a REIT?
A Real Estate Investment Trust (REIT) is a company that purchases and manages real estate properties. You can invest in a REIT, and by doing so, you'll own a portion of a property that they operate. You'll then earn an income depending on how much of that property you own and how much profit it generates.
A single property can be split up between various owners who will all receive a share of the profits. The money that these owners pay is pooled together to cover things like a down payment and renovations. At least 90% of the cash flow from the property goes to the investors, and the remainder goes to the REIT.
Benefits of REITs
REITs may not be the first choice for everyone, but for some, they're perfect. There are several benefits that can make investing in the best REITs a great decision for you.
Regular Income
The main reason most people invest in real estate is to generate income. REITs are one of the best choices for this, as once you invest, you'll start generating passive income.
You won't have to worry about any of the management, such as maintenance, collecting rent, marketing the property, etc. This makes it one of the easiest ways to generate recurring income.
Portfolio Diversification
Diversifying your investment portfolio is the best way to reduce your risk exposure. You may have already invested in things like stocks or bonds, and adding real estate in the form of a REIT can help mitigate risk.
Accessibility
For many people, the main reason to invest in REITs over other types of real estate is because they're accessible. The median house sale price in the US in Q2 of 2023 was $416,100. For most people, this simply isn't within reach.
With a REIT, you can buy a small portion of a property, sometimes for as little as $1,000. The returns here obviously won't be anywhere near the same, but it's a much more viable option for a lot of people.
Inflation Hedging
Inflation is a major issue for a lot of people, and investing in REITs can help to hedge against it. It's worth noting that REITs with commercial holdings often have agreements that allow them to increase rent prices in line with inflation.
Should You Consider REIT Investing?
You're no longer asking "What is a REIT?", but you may still be unsure of whether it's right for you or not. Real estate investing is a complex world, so you should only start making investments when you know exactly what you want.
Aksarben is a leading property management company in Omaha. We offer help and guidance to those interested in investing in real estate. Take a look at this guide to learn more about the benefits of investing in real estate.
