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Would you like to invest in real estate? To buy thousands of income-producing properties, from apartments to office buildings to industrial parks, all over the country or the world? It you’re wealthy, you might dispatch someone to travel far and wide and do just that, but even if you’re not rich you can participate. The tool that enables this is a Real Estate Investment Trust, or REIT.
A REIT uses its investors’ money to buy or finance real estate that produces income. It’s an investment in property rather than stocks or bonds. The profit it earns from leases and rents is distributed to investors. By law REITs must pay out 90 percent of this income to the shareholders, but 100 percent is more common.
Most REITS are Equity REITs, which directly own property. Mortgage REITs are indirect, investing in mortgages and mortgage-backed securities. Most REITs are publicly traded and listed on national exchanges. Some are private; these generally require a larger minimum investment.
REIT holdings include residential buildings, office space, industrial facilities, shopping centers, hotels, storage facilities and even data centers. A REIT may invest in one of these asset types or a mix of many.
There are also mutual funds that invest in REITs. Some are actively managed and others are Exchange Traded Funds (ETFs) that buy all REITs, or all REITs in specific categories, without trying to pick winners.
REITs offer the benefits of owning rental property without the headaches, homework and personal risk. If you want to buy, say, an apartment building, you must evaluate the property, arrange financing, find renters, deal with tenants and building maintenance on a day-to-day basis and handle the accounting and taxes. If your investment turns sour you’re in for a big loss. With REITs, professionals do that work, and if one property loses money it’s offset by those that do well. Also, you can put as much or as little at risk as you want in a REIT. You can buy a small number of shares for a few thousand or even a few hundred dollars.
Historically, REITs have outperformed most other investments long-term. Average returns for the last 10, 20, 30 and 40 years have been comfortably over 10%. However, REITs are subject to the ups and downs of real estate and can be a loser in the short run. Generally the best time to buy a REIT is when the real estate market is at the bottom as opposed to when it’s nearing a crest. Of course, it’s difficult to know exactly when that is, so dollar cost averaging, i.e., buying regularly over time, is a good strategy.
REITs tend not to move up and down in lockstep with stocks and bonds, so they can have a balancing effect in a portfolio. Few would recommend making REITs the major part of your holdings, but they can be an important component of your investment strategy.
Ted draws energy and joy from building synergetic relationships with his Clients. Ted's nature is graciously gregarious and persevering; he's honest; and he's been dedicated to a substantial list of clientele throughout his 25 years in the hospitality business and almost two years as a REALTOR. His passion is creating a sincere, successful relationship with people.
Ted grew up in a family of Realtors in central Indiana, earned a degree in economics and philosophy from the University of Notre Dame, and jumped into all aspects of the restaurant business. His ensuing hospitality career path eventually led him into the Event Management Sales & Service role in hotels and quickly guided him to Los Angeles, San Francisco, and finally to a luxury resort in the Napa Valley, where he, his husband, and their dog have resided for almost a decade now.
The irony is not lost on Ted that his ‘growth’ journey has culminated in“living happily ever after” in an agricultural area with a small-town feel and sense of community strikingly reminiscent of his youth…and as a REALTOR nonetheless!