Are Equity REITs Superior To Traditional Real Estate Ownership?

Are Equity REITs Superior To Traditional Real Estate Ownership?

Are Equity REITs Better Than Traditional Real Estate Ownership_ _ Ramin KamfarEquity Real Estate Investment Trusts, differing quite a bit from mortgage REITs, are becoming more attractive to investors because they’re lucrative. It’s been acknowledged by some that Equity REITs are a great alternative to personal real estate ownership.

Equity REITs’ revenue comes from the rental income deriving from their holdings, which are typically resorts, hotels, offices, industrial spaces, and retail spaces. Also, equity REITs own the responsibility of renovating, managing, acquiring, and selling real estate. Mortgage REITs differ because they tend to take ownership of existing mortgages and lends money to real estate buyers. Ahead of investing in REITs, equity or otherwise, there are some things that investors should understand.

For instance, were you aware that real estate investments trade like a stock and everyday investors are allowed to profit from the commercial real estate market in ways that are unique to this industry? REITs make it possible for the average Joe to invest in the commercial real estate market, facilitating their involvement in the development of anything from a strip mall development to a high-rise.

REITs are a response to the downfalls of property ownership. While purchasing real estate can be a meaningful investment, most people don’t know how to invest in real estate suitably. They dive in without researching, and they find that the outcome is considerably different than they expected. With that said, those who weigh the benefits of personal ownership versus investing are more likely to be interested REITs.

For one, cost of maintenance issues can be a big turn-off for most. A smart landlord will set aside money each month to cover the cost of maintenance issues which can sometimes be extremely costly. Nightmarishly, some people buy buildings or homes to quickly find that there are termite issues or plumbing issue, or internal heating issues. It’s necessary to carve out a plan to anticipate those challenges.

Additionally, if you purchase a property with the hopes that you’ll be renting it out entirely, you may find that you won’t be at full capacity. If you are buying a home with the intention of renting it out, you quickly learn that all of your cash is dependent on whether the property remains occupied. You’ll notice that your income will come to a screeching halt when there are vacancies.

Also, managing a piece of property can be expensive, and it could be time-consuming. You have to do a handful of jobs, including finding tenants, handling the property listings,
and repairing damages. If you choose to employ a property manager, you’ll have to allocate ten percent of your rental income to that manager.

For many, the answer to this challenge is equity REITs, which are “total return” investments. Again, there are two main types of REITs, mortgage, and equity.

Equity REITs differ from mortgage REITs because they involve into commercial properties. The compelling investment vehicles require that at least 90 percent of net income be distributed between shareholders as dividends. Also, those who own REITs in retirement accounts are not on the corporate level.

REITs are diversified and specialized, and there’s a variety of REITs, including retail, residential, apartment, and retail.

If you’re not sure if you comprehend equity REITs or any of the others, evaluate your level of understanding and do your homework. Learn REIT terms, the vocabulary, and the basics.

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