“What are REITs?
Real estate investment trusts (‘REITs’) allow individuals 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.”
Or, so says the U.S. Securities and Exchange Commission, better known as the SEC.
Prior to the housing crisis, there was an almost biblical belief that real estate prices would always rise. And although that belief has since been shaken for obvious reasons, REITs and real estate in general remain hugely popular. So why invest in REITs in 2016?
What the SEC Says:
“REITs provide a way for individual investors to earn a share of the income produced through commercial real estate ownership ? without actually having to go out and buy commercial real estate.”
In short, it’s a way to invest in real estate without all the hard work involved in finding real life real estate partners and becoming a real estate tycoon. If you want to diversify your investment portfolio, REITs are a very popular choice.
The Wall Street Journal Agrees…
In June 2015, the WSJ markets vertical essentially concurred with the tycoon argument, although the paper instead opted for the phrase “Use REITs to Invest Like a Property Mogul.”
Mogul, tycoon, the choice is yours.
What Does The Motley Fool Say?
Over at the Motley Fool, Eric Volkman says: “The best reason to invest in REITs, hands down, is their rich dividends. They pay out nearly all of their profits in this way, so it’s no wonder that their distributions are comparatively higher than those of other asset classes.”
What Does Wikipedia Say?
No, we do not recommend you make any investment decisions based on the crowdsourced information you find on social media. That being said, let’s be real — you look up fast information on Wikipedia all the time, and the online encyclopaedia can be a great place to start a research project. And according to the site, “REITs are strong income vehicles because REITs must pay out at least 90 percent of their taxable income in the form of dividends to shareholders.”
What Does IBIS World Research Have To Say?
Still asking yourself, “But why invest in REITs this year?”
Simply put, commercial real estate is a massive industry, with massive opportunities for the savvy investor. In total, IBIS World research found that the U.S. commercial real estate industry is worth an estimated $945 billion and counting.
So why invest in REITs? They can be a great way to diversify your investment portfolio to include real estate offerings, without the risks that come with actually owning and developing real estate. And when they do pay out, they pay out much more handsomely than many other types of investments. Of course, deciding to invest and knowing how to invest in REITs is a separate topic altogether.