Data from Trading Economics shows that the median house price in the US in October 2024 reached $545,800. Investing in real estate can be a great decision, but for many, it's simply out of reach.
Fortunately, however, there are other options that more people can pursue. Real estate investment trusts (REITs) are a modern investment option that are becoming increasingly popular amongst investors.
So what are REITs, and what's so appealing about them? Let's take a look.
What Are Real Estate Investment Trusts (REITs)?
A REIT is a company that owns, operates, or finances investment real estate. They typically cover a range of property sectors. You can invest in REITs to make an income from their properties without directly investing in any property yourself.
There are plenty of publicly traded REITs you can choose from. The passive income from REITs can vary, so it's important to research different options before investing.
Benefits of REITs
REITs have been around for decades, but continue to grow in popularity. Both new and experienced investors look to them for the various benefits they offer.
Highly Accessible
Real estate investing can be very difficult. Most people don't have the funds to purchase even a small residential property. Investing in commercial real estate is typically even further out of reach.
With REITs, you can invest a much smaller amount and then make an income proportionate to your investment size. Many REITs allow investors to start with as little as $1,000 (according to investment firm Edward Jones), so even those with a small budget can get into the real estate industry.
On top of being accessible, smaller investments help minimize risk. Some investors don't want to put too much money into a property in case anything happens. A much smaller investment with a REIT means you don't stand to lose as much money.
Diversify Your Portfolio
Portfolio diversification is highly recommended for any investor. Even if you only stick to real estate, investing in different types and locations can help lower your risk exposure and increase your income. Whether or not you already own real estate, adding REITs to your portfolio could prove very beneficial.
Inflation Hedge
If you save cash, it will decrease in value with time. Inflation is slow, but after several years, it can have an impact. Investing in assets that hedge against inflation is a good way to ensure you don't lose out.
As property values appreciate, real estate investments (including REITs) serve as a hedge against inflation. In many cases, the value of real estate outpaces inflation. As such, if you decide to sell your REIT at some point down the line, you may make an additional profit.
Should You Invest in REITs?
While real estate investment trusts (REITs) offer many benefits, they're not right for everyone. Consider these benefits alongside your investment goals so you can make the best decision for you.
If you need investment guidance, PMI Capital Region can help. Our expert team has years of experience in the real estate industry and can provide tailored guidance and services based on what you're trying to achieve.
Contact us today to find out more about how we can help you.
