Investing in real estate is a highly lucrative option as it has historically fetched better returns than other forms of investment.
However, not many people prefer to tap into these returns simply because buying, holding, and selling physical assets are a huge hassle. Imagine, you have a property in one city and want to move to another. What would you do with that property? Though you can sell or rent it out, it may not fetch the same level of returns and this is why many people do not prefer to invest in real estate properties.
In recent years, investors have had more options in real estate investing, thanks to the emergence of Real Estate Investment Trusts or REITs in short.
What is a REIT?
A REIT is a company that owns different types of residential and commercial properties, and manages them with an aim to generate profits.
Essentially, this company takes money from different investors, invests in properties, and manages them to earn profits. The same is shared with the investors as dividends.
Some REIT companies are also involved in financing real estate companies.
As an investor, REITs can be a good investment avenue that fetches excellent returns.
Reasons to Invest in REIT
Here are some reasons to invest in REITs.
REITs give you an opportunity to diversify your portfolio.
There are many kinds of REITs, so you can choose the one that best fits your needs. Some REITs focus on specific sectors such as healthcare, insurance, commercial rental, residential, financing, etc. Based on your personal preferences, you can choose a particular REIT and invest in it.
REITs give an opportunity to invest in real estate without holding and managing physical assets. This is a huge advantage as it gives you an option to participate in a real estate boom without the hassles of buying, maintaining, and selling that comes with it.
REITs are also traded on stock markets, so you can see the value of your investments at any time.
Reduced Tax Burden
When you sell a property, the capital gains on it can hover around 15% of the asset value, depending on the prevailing laws. But the dividends paid by REIT don't qualify as dividends, so don't attract a high tax burden.
One of the biggest advantages of REITs is their high dividends. Do you know that laws in many countries mandate that REITs must payout at least 90% of their taxable income as dividends?
This can translate to high returns for your investments, though the actual numbers depend greatly on the performance of your chosen REIT company.
Thus, these are some of the reasons to invest in REIT. If you'd like to invest in REITs and other forms of real investment avenues without worrying about holding physical assets, head to RoboMarkets. This may also be a good place to explore other forms of investment as well.
We hope this was insightful and enthuses you to go beyond your existing portfolio and try new investment opportunities!