Adulting comes with making a lot of decision-making situations and one of the most crucial choices we have to make is around our finances. As time passes, we often find ourselves discussing with our friends how they are investing their money and if they could share the best pieces of advice they have. During such conversations, you must have come across the term REIT. They indeed are some of the best when it comes to ROI. But what are REITs? Today, let’s decode it together!
What are REITs?
Real Estate Investment Trusts (“REITs”) allow people to invest in large-scale, income-producing real estate. A REIT is a company that owns and typically operates income-producing real estate or related assets.
But which are the ones that are worth putting our money on? Let’s see!
Retail REITs
Shopping malls and freestanding retail stores fall under this category. Retail REITs make money from the rent they charge tenants. If retailers are witnessing many customers, the mall can be certain to generate a good flow of constant income. It’s best to invest in REITs that cater to brand stores like lifestyle products, grocery and apparel. Keep track of your REIT investment. They must have good profits, strong balance sheets, and as little debt as possible (especially the short-term kind).
Residential REITs
These are REITs that own and operate multi-family apartment buildings as well as manufactured housing. For instance, 3 BHK apartments and 4 BHK bungalows in Vadodara can be found under some renowned REITs. Most profitable apartment markets feature affordable and value-for-money homes. Also, in a busy lifestyle where big cities are welcoming a lot of job seekers and high-profile professionals, accommodation options that promise a quality lifestyle with recreational and leisure facilities are more easily rented. People now want parks, gyms, and other such high-end amenities as near as possible to save time.
Vadodara promises a raise in rentals because there is a net inflow of people as jobs are readily available and the economy is growing. As long as the apartment supply in a particular market remains low and demand continues to rise, residential REITs do well.
Healthcare REITs
Covid made even the most developed countries realize that when it comes to healthcare facilities, infrastructure should be top-notch. After all, if there would be no lives, there would be no world. Be it government bodies or private, more hospitals are getting developed globally. Hence, healthcare REITs are investing more in the real estate of hospitals, medical centers, nursing facilities, and retirement homes. Remember, to look for companies whose healthcare experience is significant, whose balance sheets are strong, and whose access to low-cost capital is high.
Office REITs
Office REITs invest in office buildings. Commercial units are getting more and more prevalent as the education levels, digitisation, and overall growth of our nation are increasing. Thanks to entrepreneurship, many small start-ups which began from small rooms are blooming enough to take office spaces. This ensures that anyone investing in commercial space will surely get a good ROI either in the form of rent or a prosperous business.
REIT investing through a trustworthy name will diversify your portfolio outside of traditional stocks and bonds. Mostly this can be attractive for strong dividends and long-term capital appreciation. Although, remember, that each type of REIT has its pros as well as cons depending on the state of the economy. If this blog has made you interested in investing in REITs, you can choose the one that best fits your financial needs and investment goals, after thorough research. Just like your other investments, ensure that you remember to monitor your REIT investment periodically.