Based on your results from our Real Estate Investor Quiz, we believe Real Estate Investment Trusts (REIT) may be the right investment option for you.
Passive investing in real estate is a great way to reap the benefits of owning property without all of the headaches that actively managing your properties can entail.
What Is a Real Estate Investment Trust?
A Real Estate Investment Trust (REIT) is a company that owns and typically operates income-producing real estate or related assets. REITs allow individuals to invest in large-scale, income-producing real estate without having to purchase the real estate themselves. Instead, investors receive a share of the income produced by the property.
REITs are the most common type of passive real estate investing. There are over 1000 REITs to choose from, and there’s one for every type of asset class: self-storage, office space, apartment buildings, and more. Get an in-depth look at different kinds of REITs in this Investopedia article.
Financial services firm Morningstar found that optimal investment portfolios allocate between 4%-13% in REITs. Read more about their findings here.
REIT Pros and Cons
Pros of REITs:
- Some powerful features of REITs are their liquidity, which allow investors to sell on short notice, and that investors usually don’t need to be accredited, just able to put cash into the trust.
- Over the past 20 years, the stock market, on average, has annually increased 8% per year. Meanwhile, REITs have gone up 13%.
Cons of REITs:
- Because REITs don’t require investors to be accredited, they tend to make less money compared to other passive investing options.
- Dividends of REITs are taxed as regular income.
See how REITs stack up against other passive investing options in this article.
Want to see how to unlock your home’s equity so you can invest in REITs? Our Property Llama software will allow you to run different scenarios to figure out the best way to build your portfolio. Sign up for your free account to get started.