I know what you’re thinking. Real estate investing is just for those big rollers. Or people who bought up a bunch of property twenty years ago. And alternative real estate investments sound like something out of a classic con man movie. I’m happy to say, you’re wrong.
Real estate investing is not nearly as cost prohibitive as many investors think. Real Estate Investment Trusts (REITs) make real estate an accessible investment for anybody looking to make their money grow.
True, you won’t hear CNBC or other outlets mention REITs, but that doesn’t diminish their value. The research will show you that finding the right REIT is as profitable as investing in good companies, making for solid alternative real estate investments.
Find out why REITs are great alternative real estate investments
Telling people you own REITs is not as gripping as stories about the houses you’ve flipped or the properties you rent out. The income won’t flow in the same impressive way, and you’ll pull no comparisons to Joanna or Chip Gaines, but there is no doubt about the benefits of these alternative real estate investments.
Here are brief descriptions of the different REITs on the market:
By investing in retail REITs, you invest in the ownership of shopping malls and other retail locations. These investments make their money through the income of retail stores paying rent. Be sure to consider the retailer connected to a REIT before you invest, though. Your investment success depends on the strength of their company. The best retailers include things like grocery stores since they are one of the most essential businesses.
Retail REITs have traditionally been strong performers, but they have come under growing pressure with the continued shift to online retailing. Some businesses are more conducive to in-person shopping and are more reliable options for retail REIT investing.
A rise in rental rates can be a sign of opportunity in residential REITs. These trusts manage multi-family buildings and apartment complexes. They make their income based on rent payments. The strongest candidates for your investment dollars will be in densely populated areas with low vacancies. This will give you confidence that even if a tenant can’t pay rent, it will be easy to find a new tenant to make payments.
Opportunities for growth in residential REITs could be in cities that are becoming more popular. For example, before the tech boom pushed a flux of young, talented people to San Francisco, investing in a REIT would provide better returns than the steady and trustworthy returns of a New York City REIT.
Hospitals, retirement homes, and pediatric offices are a few of the buildings can make good alternative real estate investments. An aging population can make these REITs more desirable since more people require care. As usual, fees tied to the occupancy of these properties are what fuel returns.
The profit of healthcare buildings might seem straightforward, but there is more to consider than meets the eye. Make sure you pay attention to the provider’s financial strength and the funding behind healthcare systems. Changes to the financing of healthcare create shifts in the profitability of different healthcare REITs.
Even in the age of growing remote work, plenty of businesses still maintain office space. Office REITs tend to lease spaces that come with long-term leases. A long-term lease could indicate steady, predictable income, but only if the area is economically stable.
Unless there is reason to believe an economically deprived area will experience robust development, even premier office space in the location is an investment best avoided.
Some REITs invest in mortgages instead of property directly. The value of mortgage REITs connects to interest rates. The interest rate indicates how profitable a mortgage can be. A mortgage with a low rate will be less valuable, especially once interest rates rise.
REITs have a track record of being some of the most profitable stock assets you can own. Like with any other investment, however, the key is in knowing your stuff. If you’re more interested in owning hard, physical assets but don’t have the money to buy them yourself, REITs are the way to go.
Alternative real estate investments like REITs allow for fewer hassles than owning rental property. Do you agree or disagree?