Planning to invest in Real Estate but don’t want to put huge amount of money in it? Not to worry, because it is possible. Everybody knows that real estate requires a hefty amount of investment. But if you don’t have enough money to put in, the best way to do it is through Real Estate Investment Trusts, also known as REITs.
Having said that, firstly, let’s understand what are REITs?
What are REITs?
REITs are companies that own, finance and operates income-producing properties, including office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, and mortgages or loans. Basically, it is a secure mode of investment that provides all types of investors, big or small, an outlet for generating regular cash-flow, portfolio diversification, and long-term capital appreciation, just like the mutual funds.
Suppose, if you want to invest in a commercial property in Delhi , then REITs would be a good option for you to earn high-dividends from it.
Besides low entry levels, REITs also help its investors with a safe and diversified portfolio at a minimal risk and that too under the professional management, ensuring good returns on investment.
In today’s era, anyone with an online brokerage account and some spare cash can invest in REITs.
Notably, investors have plenty of options when it comes to investing in REITs. There are mainly five types of REITs – Retail, Residential, Healthcare, Office and Mortgage. Each one of them has its own pros and cons.
Is REIT a good investment?
The answer to this question is yes! Over the past few years, REITs have proven to be one of the safest and easiest way of investment, as far as real estate is concerned. It provides investors several benefits that make it an ideal fit in any investment portfolio.
However, in India, the concept of Real Estate Investment Trust is relatively a new and the first guidelines related to it were introduced by SEBI (Securities Exchange Board of India) back in 2007.
So, what makes REIT a good investment option? There are several factors that make REIT an ideal choice to invest in and some of them are listed below:
Portfolio Diversification
As we have mentioned above, REITs are the best way to diversify your portfolio across the commercial real estate market. Not many people get an opportunity to go big and purchase a commercial property to generate regular income. On top of that, diversification also helps in mitigating investor’s risk without negatively impacting on his returns.
Liquidity
Buying or selling any real estate unit often takes a while as it is a very long and hectic process. But that’s not an issue in the case of REITs as they are highly liquid. In REITs, most of the commercial real estate can be bought or sold with just a click of a button. If you want to buy a commercial property in Delhi , you can consider REITs as a trusted option.
Transparency
When it comes to transparency, you can completely rely on the REIT as independent directors, auditors, analysts, and financial media closely monitor its performance.
High-dividends
One of the major advantages of REITs is that they offer high-yield dividends which eventually attracts multiple investors. REITs are required to pay out 90% of the taxable income to shareholders; thus REIT dividends are often much higher than the average stock funds.
How to invest in REITs
When it comes to investing in REIT, most of the people think that it must be a difficult process. But it is not. You can buy shares in REIT, which is listed on major stock exchanges, just like other stock funds.
If you are investing in REIT for the first time, it’s better to take the assistance of a broker, investment advisor or financial planner. He/she would be able to recommend you the appropriate REIT investments after analysing your financial objectives.
Some of the well-known REITs are as follows:
