You can invest in a publicly traded REIT, which is listed on a major stock exchange, by purchasing shares through a broker. You can purchase shares of a non-traded REIT through a broker that participates in the non-traded REIT's offering. You can also purchase shares in a REIT mutual fund or REIT exchange-traded fund.
The relatively low correlation of listed REIT stock returns with the returns of other equities and fixed-income investments also makes REITs a good portfolio diversifier. ... Portfolio Diversification: REITs offer access to the real estate market typically with low correlation with other stocks and bonds.
Most REITs are publicly traded like stocks, which makes them highly liquid (unlike physical real estate investments). REITs invest in most real estate property types, including apartment buildings, cell towers, data centers, hotels, medical facilities, offices, retail centers, and warehouses.
REITs, or real estate investment trusts, were created by Congress in 1960 to give all individuals the opportunity to benefit from investing in income-producing real estate. REITs allow anyone to own or finance properties the same way they invest in other industries, through the purchase of stock.
Non-traded REITs have little liquidity, meaning it's difficult for investors to sell them. Publicly traded REITs have the risk of losing value as interest rates rise, which typically sends investment capital into bonds.
Investors often purchase REITs for their dividends. ... Everything that could go wrong for REITs in 2020 did. This means, if the vaccine is successful and the pandemic subsides in the second-half of 2021, REITs will be undervalued and should have a strong recovery from depressed levels.
Potential drawbacks of REIT investing
REITs tend to have above-average dividends and aren't taxed at the corporate level. The downside is that REIT dividends generally don't meet the IRS definition of "qualified dividends," which are taxed at lower rates than ordinary income.
Warren Buffett rarely invests in REITs, whether it is directly or through his company, Berkshire Hathaway (BRK. B; BRK. A), so when he does, it is worth taking a closer look at what he is buying and why. Currently, Warren Buffett's largest REIT investment (that we know of) is STORE Capital (STOR).
Since the start of the modern REIT era in 1991, U.S. REITs have outperformed the S&P 500 by more than 7% on average in late-cycle periods, and by even wider margins in recessions and early recoveries (cover exhibit). ... First, REITs tend to have predictable, lease-based revenues.
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