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4 Benefits of Diversifying Your Portfolio With REITs

System - Thursday, January 19, 2023
Property Management Blog

Are you looking to diversify your portfolio?

You're not alone. Many investors want to diversify. They've heard that real estate is a great way to do it, but they're not sure how to get started.

That's because they don't understand REITs.

REITs (Real Estate Investment Trusts) are companies that own or operate real estate that generates income. Instead of allowing for investment in one real estate property, REITs allow you to invest in multiple properties via one REIT. REITs aren't new either - they've been around since the 1960s.

Fortunately diversifying your portfolio has never been easier thanks to REITs.

Here are 4 benefits of investing in REITs that you need to know.

1. High-Yield Dividends

Unlike other investments, REITs can offer high-yield dividends. They are required to pay out 90% of their taxable income to their shareholders. That means the dividends from REITs can be higher than the average stock.

These high-yield dividends can be a great source of passive income.

2. Diversification Options

For many interested folks, real estate investments are out of the question. The initial upfront cost is too much. This is especially true of commercial and retail property, which can easily be worth millions.

However, REITs allow investors to not only own real estate but different categories of real estate. REITs can be focused on residential, retail, office, or healthcare spaces. There are even mortgage REITs, which invest in mortgages instead of the actual property.

Diversifying your portfolio is always important. REITs shouldn't be the sole vehicle in your portfolio, but along with investments like stocks and bonds, they can be a great investment.

3. Easy to Get Started

REITs are easy to get started with. If you have a brokerage account, they may already offer REITs. If not, getting a brokerage account set up is easy.

There are many, many options available for brokerages - far too many to cover in this post, so make sure to read brokerage reviews to find the right one for you. Some excel in the design of their mobile apps, others excel in customer service, and others offer low fees.

Many of these brokerages offer a free or low cost for managing your REITs yourself.

4. Highly Liquid

Traditionally, buying and selling real estate took time, and cash was tied up in the process. However, REITs are easily bought or sold. That means your cash is not in limbo for months at a time. Since there are dozens of popular brokerages online, as well as brokerage apps, you can begin investing in REITs almost immediately.

There's also the cost and hassle of managing a property on your own. Alternatively, a local partner like us can manage your residential property for you.

Consider Diversifying Your Portfolio With REITs

Any investment is not without risk, and REITs are no different. It's possible to lose money on REITs. Investing in a REIT that is mainly retail, for example, may not fair well during a recession.

Still, diversifying your portfolio is important, and if you want to invest in real estate, REITs are a great way to get started.

If you're a REIT, or an individual looking to invest in property, you need good property management. In the San Antonio area, there's no better choice than HomeRiver Group. Your rental property is our priority.

Contact us for help.