Three Tips for Choosing an REIT

Real estate

There are a number of reasons why smart investors often choose to invest in commercial real estate: for example, buying and renting out commercial buildings gives property investors access to consistent cash inflow from rent payments and resident fees. Because of this, it isn’t surprising that the United States commercial real estate industry is worth $945 billion. However, potential investors who do their research will likely realize that there are more benefits to investing with a real estate investment trust, or REIT. A REIT is a company that owns, operates and often finances income-producing properties like office and apartment buildings, shopping centers and more. This gives investors access to trusted experts who can identify great opportunities in the commercial real estate market. Unfortunately, it isn’t always clear how to invest in a REIT. Follow these tips to make smart decisions when investing in these trusts.

Look for Established REITS
If you’re trying to learn how to invest in REITs, you have likely started your journey by looking at their numbers. Because of this, you probably noticed that a number of newer trusts emerged in the last few years, boasting high valuations and low interest. However, most financial experts say that you should look for older, more established REITs, as they will have more financial data for you to scrutinize. Additionally, established REITs are more likely to be managed or associated with experienced professionals: Brian L. Katz, for example, became President and Chief Operating Officer of American Real Estate Partners after spending a number of years in the real estate industry and obtaining two degrees in real estate and economics.

Look for Publicly-Traded Trusts
Equity REITs either trade on a stock exchange or are non-traded. However, publicly-traded REITs have been shown to outperform non-traded trusts over time, recover faster during downturns, have lower fees and thrive in bull markets. Moreover, non-traded REITs have become known in the investing world for their lack of transparency; the Financial Industry Regulatory Authority has even issued warnings to investors about this problem. If you’re learning how to invest in a REIT, keep this fact in mind.

Keep Your Profile Diverse
If you’re in the process of figuring out how to invest in a REIT, it is natural to want to take advantage of your opportunities as much as possible. Keep in mind, however, that REITs are not risk-free and should only make up five to ten percent of your portfolio assets. Experts recommend that investors also focus on bonds and other opportunities to avoid complications.

Like every investment, there is an element of risk involved with REITs. Additionally, not every trust on the market can or should be trusted. However, by making smart financial decisions, it is possible to reap a number of benefits from this endeavor. Follow the tips above to find the best REIT for you!
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