Types of REITs and How to Invest In Them

REITs are becoming more and more popular among investors due to their high profitability. Not only do they provide favorable diversification, they offer higher returns and capital appreciation as well. The system’s ability to generate profitable income with low risks makes it a much better alternative to traditional investment methods such as stocks and bonds. REITs usually own and operate commercial real estate properties that generate income through selling and renting. When you are planning to invest in such companies, you need to be careful since there are many types of REITs available on the current market. The following are some main types that you need to consider.

Residential REITs

These are companies that manage rental apartments and manufactured housing. If you are planning to utilize this method, you need to think about several factors. The best REITs on the market seem to be in urban centers with high populations. Since the individuals in these areas are unable to fund the purchase of a single home, they prefer to rent out. This affordability will enable you to find tenants without any issue. Hence, investing in residential properties can be profitable at all times.

Healthcare REITs

Since the number of senior citizens and medical costs keep on increasing in many countries, funding healthcare properties has become a popular trend. Through this system, you can invest in hospitals, nursing facilities, research centers and retirement homes. Most people are under the impression that a REIT that invests in properties cannot make profitable dividends. On the contrary, this is quite a profitable venture, especially since the occupancy rates in medical facilitieswill not dwindle.

Retail REITs

Statistics reveal that approximately ¼ of REIT investments are based on retail properties such as shopping malls and other recreational centers. Any shopping center that you visit is likely to be owned by a real estate investment trust since it is considered to be a highly profitable venture. When planning to fund a retail store, your main concern should be the economic prosperity of the particular retail industry. You need to have a clear understanding of how the industry currently operates. You must also be confident about its future financial prospects. Choosing the wrong retail industry can ruin your finances regardless of how profitable this investment method can be. Retail REITs make income through the rent collected from the tenants. So, keep in mind that any cash flow problems among the shopkeepers can affect your revenue generation.

Office REITs

If you are interested in funding office buildings, then this is the type of REIT you should opt for. Usually, these systems involve tenants who sign up for long-term leases. When utilizing such methods, you need to pay a great deal of attention to the unemployment rate in your area. You also need to think about vacancy rates and the general state of the economy. Since the popularity of online businesses is increasing in the current market, it is important to choose a reliable REIT.

The type of REIT you choose entirely depends on two factors: your financial affordability and the market value of the industry. Therefore, take these factors into consideration before you make up your mind.