Investing in REITs has many advantages.
- Investment in real estate, without having to purchase property
Using REITs, you can invest in real estate without having to purchase property. It is possible to purchase shares of REITs with a few hundred or thousand dollars, rather than the tens or hundreds of thousands of dollars that would be needed to purchase property directly.
Similarly, placing money in a REIT saves the investor the logistic difficulties involved in purchasing property (using appraisers, signing contracts, transferring ownerships, bad surprises due to lack of knowledge etc.).
- Highly tradable
Since shares in REITs are traded in exchanges just like ordinary corporate stock, they can be bought and sold quickly and easily. Tradability is a significant advantage over direct property ownership, since selling a real property can be very difficult, expensive, and take months to complete.
- Constant income from dividends
REITs are required to issue dividends covering at least 90% of their profits, and therefore, they provide the investor a regular source of income. The yields from dividends on REITs are relatively high. Between the years 1995 and 2000, the average dividend rate was 7.3%, about four times higher than the average on all stocks.
- Professional management
Professionals that specialize in the real estate market manage REITs portfolios.
- Diverse investment portfolio
Purchasing shares of a REIT gives an investor exposure to the real estate market. History shows that the real estate market is not directly related to the stock or bond markets. Therefore, adding REITs to a portfolio provides an additional and quality level of diversity.