What is REIT and How to Invest in the Various REIT Types
A look at some of the most successful investors in Toronto real, such as Dimitrios Neilas, gives young investors the desire to invest in a property. However, such investors often have a limited amount of capital to invest in real estate. The most viable option in this case would be to invest through REITs. If you are wondering what a REIT is, you probably are new to this industry. A Real Estate Investment Trust (REIT) is a company that finances or owns income-generating real estate. Having been modeled after mutual funds, these trusts invest in real estate in order to make money. As a shareholder in a real estate investment trust, you will be collecting money from the company, in the form of dividends.
Other than paying taxes for their dividends, shareholders are not required to do anything for them to get a regular income from their investment trusts. As a young investor, who probably does not have enough money to buy property in Toronto, investing through these investment trusts would be a great idea. Additionally, investing through REITs offers investors capital appreciation in the long run as well as diversification. If this is your preferred real estate investment option, you should consider investing through the following types of REITs.
These types of Investment trusts often invest in such real estate property as rental apartment buildings and manufactured housing. When buying residential investment trust shares, you should consider investing with the ones that have property in apartment markets where the affordability of homes is comparatively low. The high cost of homes in such markets will force more residents to rent rather than buy homes, which allows landlords to charge higher rent. This being the case, REITs with property in such markets are able to make more profit, which translates to higher dividends. With such investment trusts, you will be able to get a higher return on your investment.
The Mortgage real estate investment trusts that are listed on the stock exchange offer investors an easy way of holding equity investments within the mortgage market. Such an investment option comes with enhanced transparency and liquidity of the publicly traded equities. Although mortgage REITs invest in mortgage rather than in real estate equity, they are equally risky. For instance, an increase in interest rates often results in reduced book value for mortgage REITs. This, in turn, will lead to reduced stock prices. Similarly, such an increase in interest rates makes financing more expensive for the mortgage investment trusts that source their capital from unsecured and secured debt offerings.
Other REIT Types
In addition to the above mentioned REIT types, you may also consider investing through healthcare, retail and office REITs. Since real estate investment trusts are traded on NYSE or NASDAQ, investing through them offers investors an opportunity to diversify their investments. Rather that considering the payout ratio, your choice of the right REIT should be influenced by the funds from operations (FFO) in the trust.
If you are looking forward to investing in real estate in Toronto, Waterview Capital Corp. can help you invest in the right property.