reit investing
In REIT Benefits which is short for Real Estate Investment Trust, we will cover benefits of buying into these stocks below.
High dividend yields
To put things into perspective companies on the S&P 500 typically have a dividend yield of around 2%, where as its normal for REITs to have a stable dividend yield of 5% or more. REITs are able to sustain these high yields as they have to pay 90% or more of taxable income towards shareholders.
For this reason REITs are seen as a good option for income investors or for dividend reinvestment.
No corporate tax
For a company to be classed as a REIT they have to meet certain requirements, such as, invest 75% or more of their assets in real estate and pay a minimum of 90% taxable income to shareholders.
When this is achieved zero corporate tax is applicable, which avoids being taxed twice on your dividend.
Access to commercial real estate
The main purpose REITs were conceived was to provide all investors with the chance to be able to invest in assets that were unattainable without a vast sums of wealth. These include apartment complexes, shopping malls, data centers and office spaces, just to name a few.
Portfolio diversification
If you’re looking for a great way to diversify your investment portfolio, REITs are a great way to achieve this, because even though REITs are stocks, real estate isn’t in the same asset class as equities.
This is very useful, as real estate has historically weathered economic downturns better than stocks whilst maintaining a stable income.
Total return potential
As REITs assets increase in value, there is great potential for capital growth. This is because REITs can employ different strategies to create extra value, combined with high dividend yields, and you can then see how REITs have great total return potential.
Liquidity
Since REITs are technically stocks you can buy and sell, with the click of a button making them a much more liquid investment, as opposed to the changing of hands of real estate property.
The bottom line
For majority of investors the positives of adding REITs to a diverse portfolio outweigh the negatives. But it’s highly advised to learn more about individual REITs prior to investing.
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6 REIT Benefits Conclusion
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