Why Should I Invest in a REIT?
In the real estate investing world, there are many options to choose from. Residential real estate, commercial, crowdfunding platforms, as well as purchasing raw land. Yet, the one that is potentially the easiest and most profitable is a REIT, also known as a real estate investment trust or real estate stock.
You may be asking yourself, "what is a REIT?" It is a company, like HappyNest, that owns and often operates income-producing real estate. The property types range from apartment buildings to hospitals, hotels, shopping centers, and warehouses. Traditionally, buying such properties would require a sizeable out of pocket investment, and for that reason, this market has historically been accessible only to the wealthy. With a REIT, you do not directly own the property, allowing for more financial flexibility and less property management headaches. Additionally, REITs don't have to pay corporate taxes on the majority of their net income, because they're required to shell out 90% or more of net earnings to investors, making it easier to pay higher dividends.
So, what makes this investment so great?
REITs not only provide a steady stream of income through dividends, but they have historically outperformed the stock market as well. REITs are monitored by the SEC, U.S. Securities and Exchange Commission, so they must provide transparent financials to the public, allowing you, as the investor, a sense of ease and confidence.
The majority of publicly traded and some public non-traded REITs allow investors to reinvest their dividends. By enrolling in a dividend reinvestment program (DRIP), you can take advantage of the mathematical magic called compounding interest, which will help you reach your investing goals faster.
Although this investment is regarded as a low-growth investment, it can be more liquid than direct investments in real estate assets. It also serves to balance an investor's portfolio. In some instances, REITs may charge high management and transaction fees; however, some feel the out-of-pocket cost is worth it given the accessibility to professionally managed portfolios that have provided consistent returns.