If you are keen on real estate, you needn’t just own physical property. You can also buy the shares of a Real Estate Investment Trust (REIT). A REIT is a company that owns and manages income-generating real estate assets. REITs offer five key advantages:
Affordability
Unlike buying physical properties, REITs can be purchased with small initial outlays. They offer a more affordable investment proposition.
Diversification
You can diversify your risk exposure by different geographic locations and property types from apartments and offices, to shopping centres, hotels, hospitals and warehouses.
Low correlation
REITs tend to have low correlation to equities, largely due to their more predictable income stream which in turn reduces their share price volatility.
Income generation
As REITs are required by law to distribute at least 90% of taxable income to shareholders each year, you can be assured of receiving a regular dividend income, although the amount may vary each year.
Liquidity
The ability to easily buy and sell units in REITs makes them a liquid proxy to physical real estate.
