REIT Investment Strategies: A Guide For The Everyday Investor 

Real estate investing has long been a proven strategy for people looking to accumulate wealth. Whether it's building equity in your own home or saving up enough money for a second property, real estate is often a tangible investment that typically moves up and to the right. 

For those who can pull together the capital needed to get started, there are some important elements that need to be considered before taking the leap. 

In case REIT investment strategies are unfamiliar to you, this article will highlight how they work, how they can benefit you and what strategies the everyday investor can implement to get started.

Real Estate Investment Trusts (REIT): What Are They?

Real Estate Investment Trusts (or REITs) are companies that own or finance income-producing properties across a range of sectors. These sectors can include:

  • multiplex buildings
  • apartment buildings
  • commercial buildings like box-store shopping centers
  • self-storage facilities
  • healthcare facilities
  • large data centers

REITs pool together the collective capital of investors and they invest that capital in various real estate sectors like the ones mentioned above. The profits of these investments are then distributed back to investors.

REIT Investment Strategies: A Guide For The Everyday Investor 

There are a number of requirements that must be met in order for a company to qualify as a REIT. One of the first requirements is fairly obvious: REITs must invest at least 75% of their capital in real estate related sources. REITs must also attain at least 75% of their income from real estate related sources. Most importantly, REITs are required by law to allocate at least 90% of their income back to their investors.

Depending on the REIT you are investing in, there may be a minimum investment requirement to get started. Even with that stipulation, REITs are a fairly simple way to invest in property that is typically out of reach for your average investor.

Interested in learning more? Check out our article How To Start Real Estate Investing In Your Thirties.

Benefits of Investing in a REIT

One of the biggest benefits of investing in a REIT is one that's already been hinted at. It's rare that an investor would have enough capital to single-handedly purchase an apartment complex or a large commercial property. REITs offer an easy on-ramp for everyday investors and often provide larger returns than an average stock and bond investment might.

REITs are often free of many of the hassles associated with direct ownership through your own LLC. The horror stories of direct ownership are seemingly endless. Unexpected property maintenance, difficult renters, not to mention all your capital tied up in a single asset. These realities don't have to be deal-breakers, but the benefit of a REIT is a diversified investment and efficient handling of all the behind-the-scenes details.

With all of this, real estate is known for how it appreciates in value over time. On top of the regular yields you receive through dividends, you also get a return on the appreciation of the asset you've invested in when you opt out.

Strategies for Investing in a REIT

How does one go about investing in a REIT? The good news is that many REITs are publicly traded on major stock exchanges. This represents a sense of validity and transparency in what you are investing in. That said, this path of investing in a REIT is also susceptible to the general ups and downs of the market as a whole.

Alternatively, there are exciting new crowdfunding platforms like Fundrise where the real estate investing market is entirely online and can even be managed from your phone. These online platforms often have a much lower initial investment requirement (as low as $500), making real estate investing more accessible for the average, everyday investor.

Finally, as mentioned above, the REIT market is incredibly diverse. Whether it's a residential home market, commercial market, healthcare or technology, the range of investment classes available to you is huge. Find something you are familiar with or passionate about, get connected and watch your money grow.

Interested in learning more? 7 Real Estate Investment Strategies That Made My Clients Wealthy.

Is A REIT Investment Strategy For You?

Whether you are considering investing in real estate for the first time or whether you have a few properties in your portfolio already, a REIT is worth looking into. Private ownership is a solid option if you are familiar with your local real estate market, and if you are financially savvy and able to deal with the renters and the inevitable repair and maintenance. But a REIT gives you the opportunity to remain hands-off while earning reasonable returns. Explore tapping into this proven strategy for wealth management and diversification.

Last Updated: 
February 19, 2021

Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.

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