As the stock market continues to spook investors with its wild gyrations and yields on bonds and savings instruments sink to near zero, many investors are beginning to panic as they watch their investment returns shrink. That may be one reason why Real Estate Investment Trusts (REIT) have suddenly caught fire. Investors are discovering that REITs can provide healthy yields and capital appreciation potential in a relatively safe investment.
Essentially REITs are companies that purchase and manage real estate and the income they generate from leases and sale profits is passed directly onto investors. REITs are traded like stocks on the major stock exchanges so anyone can buy shares of ownership in diversified portfolios of residential or commercial real estate. Here’s why you might consider a REIT for your investment portfolio:
- It enables you to further diversify your portfolio into quality real estate.
- REITs are traded on the stock exchange so they are considered to be a liquid investment.
- They tend to behave differently than the stock and bond markets which can stabilize your portfolio.
- The real estate is professionally managed to maximize income and sale opportunities.
- 90% of all income and profits generated must be distributed to shareholders.
- You can target certain regions or types of real estate that offer the best upside opportunities.
REITs aren’t for everyone and there are certain risks involved with real estate investments, such as the potential for market declines and increasing interest rates.