So…you want to invest in real estate, but without the hassle of upkeep, maintenance, & overhead costs?
Cool. Let me explain how.
First, Google “REITs” and do some quick reading, then come back here. (Check out Investopedia’s article, it’s great).
Ok welcome back…
“Real Estate Investment Trusts” – REITs.
Think of these just like an index fund or mutual fund. You know how much I love investing in those. Since an index fund usually comprises an investment in a variety of companies for a fraction of what investing in one company, the same goes for REITs.
Here’s some high level notes about REITS…
1. Investors can own a diverse group of properties inside of a fund which is traded similarly as a stock in the market.
2. REITs produce high dividend yields. These dividends can be paid out or reinvested.
3. The most notable concern with a REIT ETF, at least from a profitability standpoint, are rising interest rates.
4. REITs are essentially companies who own, operate, or finance income producing properties.
5. With REITs, you have options for investing in specific types of real estate, but many REITs also include residential & commercial as well as data centers and even medical centers.
We love REITs…
Simply because in addition to the physical properties we own, we can also invest in other properties through REITs. We choose to invest in publicly traded REITs that we add to our IRAs in our Fidelity portfolios. There are many other options including non publicly traded ones as well. These usually are found outside of brokerages like Fidelity & have different requirements, but function the same but are less “liquid” than publicly traded ones.
Diversification is key with investments. You’ve heard people say, “don’t keep all your eggs in one basket” before. It’s vitally important that you diversify your retirement & investments to not rely solely on your employer. Employer 401ks are great, however they aren’t like employer pensions which are all but non-existent today. Pensions once provided most retirees everything needed in retirement, but since they are no longer an option, you cannot solely depend on your 401k, you must diversify!