Real estate is always a popular investment choice. After all, you are investing in an actual entity when you invest in real estate. It's not a bond that only exists on paper or a stock that is dependent on someone else running a business. One of the more interesting investment vehicles available are real estate investment trusts.
A real estate investment trust, or REIT, is a corporation that invests in real estate in some fashion. Equity REIT companies invest in actual properties, mortgage REITs invest in mortgages and mortgage-backed securities, and hybrid real estate investment trust companies combine the two. Shares in REITs can be purchased on an open exchange, through a mutual fund, or through private connections.
When considering REIT investments to diversify your portfolio, among the key points are:
- The availability of a REIT in which you’re interested;
- The management team behind the real estate investment trust companies;
- The goal of your interest in investment trusts.
Action Steps
The best contacts and resources to help you get it done
Find real estate investment trusts that tickle your fancy
You're more likely to maintain your interest in REIT funds if they cover something of interest to you. Whether you're interested in global real estate investments to dabble in the international marketplace or you're ready to become a U.S. commercial real estate mogul, there are listings of real estate investment trusts that will help find the REIT for you.
I recommend: Yahoo’s listing of
real estate investment trust companies is considered to be one of the more diverse available, as it contains REITs of all shapes and sizes. The National Association of Real Estate Investment Trusts offers a
search engine of its member REITs that allows you to be as specific in your search as you wish.
Invest in REITs with management teams you know and trust
When you invest in a REIT, you are placing your money in the hands of the management of that fund. It's therefore imperative that you trust the management team behind the Real Estate Investment Trusts. You need to feel comfortable with the direction in which they're taking the group. If you don't know the management team personally, ask for references and do your research before you put down a dime.
I recommend: Cohen & Steers has an impeccable reputation in REIT circles for managing funds.
LaSalle Investment Management is another REIT management firm that works both domestically and internationally.
Pursue short- or long-term goals with REIT investments
REIT companies are typically part of your portfolio if you're looking for long-term diversification. After all, their average annual yield of 8% beats many fund and bond averages. However, if you're looking at REIT investments for a quick buck, this is also possible with some funds. So make sure your chosen REITs match your portfolio goals.
I recommend: The National Association of Real Estate Investment Trusts offers a
library of REIT data, including performance and index data. Forbes also
graded REIT funds to try to find the best of the best.
Tips & Tactics
Helpful advice for making the most of this Guide
- If you're interested in investing in a private REIT, get as many details and references as possible because these are not covered by SEC regulations.
The official source of Real Estate Investment Trusts (REITs) is
the Real Estate Investment Trusts (REITs) page at Business.com
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