First things first, what even is a REIT? A REIT (Real Estate Investment Trust) is a company that owns and operates real estate that produces income. So why should you, the investor, be considering a REIT? Real Estate Investment Trusts have performed at a high level for the past decade producing upwards of 12% annually on returns for their investors. When compared to the rest of the options available in the market, they earn an additional 2%.
They are defined as total total return investments providing a higher yield on dividends.financial Here are some basics for the understanding of the various sectors that encompass REITs. It should be noted that regardless of the sector you are looking into, we suggest looking at companies with a proven track record backed by years of experience.
Residential REIT
Residential REITs focus on apartment buildings and forms of modular homes. If you are thinking of investing in a Residential REIT you are going to want to look into markets where affordability is lower such as commercial real estate in Missouri. In turn this causes Residential REITS to place their attention on larger urban settings where more people are willing to purchase rather than rent. For example more people are going to purchase commercial real estate in St. Louis compared to a place like New York where they are more likely going to rent. The commercial property for sale in St. Louis largely outweighs the likelihood of being purchased compared to other places that have a higher cost of living.
Retail REIT
As the name suggests, these REITs cover the retail portion of investing in places such as shopping malls and other retail oriented locations. Unsurprisingly these are the number one forms of REIT in America boasting a whopping 24% of all REIT investments. Before investing in Retail REITs you should consider the consumer market and if it would be a wise investment. Opposite to Residential REITs, Retail REITS make money off the rent that is collected from the retail business owners. Therefore, it is wise to invest in Retail REITs that are invested in successful businesses that have no problem keeping up with their monthly payments.
Mortgage REIT
The second largest REIT sector can be found in Mortgage which takes up 10% of all REIT investments. Even though they are the second largest sector they are more uncommon to your average investor due to their demand for a higher start up capital, but present lower risk overall. They secure their capital return by debt offerings such as interest rates which fluctuate heavily based on the market. Most REITs accommodate this flucitation, but you will have to find the correct one.
Healthcare REIT
REITs that invest in various medical facilities such as hospitals, medical training centers, and even retirement homes, cover a very generalized look at America’s healthcare system which in turn spreads ones risk heavily through various sectors which are good and bad things. It diserfities the coverage, but also provides a wider array for risk. We suggest looking for a company that is experienced in trends when it comes to the Health Care system during a time of increased demand for proper medically related services.
If you’re considering an REIT, then you need to get in touch with an experienced agent who can help you find the best option to suit your needs. Get in touch with Cardinal Realty Group, an established industry leader with more than 35 years of commercial real estate experience. Call 636.225.0385 or send an email at Hal(at)CardinalRealtyGroup(dotted)com.