A lot of people think it’s “either/or” when it comes to investing in real estate or stocks.
But things don’t need to be so black-and-white.
While yes, one of the biggest differences between stocks and real estate is the barrier of entry with the amount of capital required to start, it is possible to invest in real estate in a similar way through something called REITs (Real Estate Investment Trusts).
REITs are essentially companies that own and operate income-producing real estate – whether that’s office buildings, apartments, shopping malls, warehouses or hotels (just to name some). They are traded on major stock exchanges making them an accessible and liquid investment for both institutional and individual investors.
What this means is that if you’re looking to invest in real estate but:
- you’re not interested in being a landlord
- you’re not interested in managing and maintaining properties
- you want to be able to easily diversify across various different properties (and potentially different types of property as well)
REITs are an attractive alternative option.
Advantages of Real Estate Investment Trusts (REITs)
In addition to providing diversification away from stocks, REITs offer several other benefits. For example:
- They tend to be less volatile than the stock market and provide a steady stream of income through more consistent (and generally higher) dividends
- They offer the potential for capital appreciation as the underlying properties increase in value
- They can provide your exposure to a broad range of real estate asset classes (including niche sectors such as senior housing, storage facilities, or self-storage units)
- Most REITs will also have their own internal leverage to purchase their properties, so you won’t need to incur mortgages yourself to get your real estate exposure, saving you a lot of potential mortgage stress.
Perhaps the most advantageous aspect of investing in REITs is it’s essentially stock investing – but in listed real estate companies.
This means you now also have the carried advantage of being able to buy in and sell out pretty much any time you wish to get instant exposure to the real estate asset class.
Simplified Due Diligence – Multiple Properties Within a Stock
Another carried advantage of investing in REITs is the ability to research them like you would for any other stock.
What this means is instead of having to think about things such as:
- Capital growth
- Rental demand
- Location
- Age of the property
- Property features and renovations
All you have to think about is a few key financial figures such as the ones I talk about in my 10-step stock checklist.
This greatly simplifies your research and allows you to instantly diversify your portfolio across multiple different properties with just one stock code, instead of having to conduct due diligence for each and every property included in the REIT.
If you’d like to learn more about how we research stocks, I’d like to invite you to check out my FREE checklist.
It’s called My 10 Must-Have Criteria to Choose the Strongest Stocks and AVOID the Lemons, and in it, I’ll teach you how you can filter out what I personally consider the top 1% of stocks in less than 5 minutes.
Click here to download that checklist
Terry
