Most real estate investors ask, ‘is real estate investment trusts a good career path in 2021?’ If you are one of them, this guide will help you understand the potential of REITs and the risks involved in them. 

Along with that, you will know about various types of REITs available in the real estate market. Also, you will learn to consider different factors before investing in any REITs. So, if you are looking for investment opportunities in the real estate market, continue reading. 

Is Real Estate Investment Trusts a Good Career Path?

Investment Trusts a Good Career Path

Well, you need to weigh the pros and cons of REITs before determining whether it’s a good career path in 2021. Now, let’s figure out: is real estate investment trusts a good career path for this year? 

Pros and Cons of REITs

The following table will help you weigh the pros and cons of real estate investment trusts and whether it’s profitable to invest in them. 

                 Pros of REITs                  Cons of REITs
  • The biggest advantage of investing in real estate investment trusts is, you can get higher dividends. Since REITs pay 90% of taxable incomes to the investors, they are a better option than conventional stocks in the share market. 
  • REITs are the best investment assets for diversifying your portfolio. Everyone cannot invest directly in real estate properties due to the complex process involved in them. 
  • REITs also provide higher liquidity, and it’s easier to buy and sell than a direct investment in real estate properties. 
  • All the REITs have not the same tax liability. Some REITs have higher tax deductions than others. So, investors need to be careful about choosing the right REITs. 
  • Sometimes REITs’ price falls when the federal reserve tightens up the spending. So, the funds have to pay high-interest rates to the federal reserve. So, you should also be aware of this before investing in REITs.
  • Some REITs like hotels perform very poorly during a downfall. So, you may risk your investment if you invest in them during a crisis. 

The above information has provided you the potential advantages and drawbacks of investing in REITs. Now, it’s your turn to decide whether you want to invest in them or not. What do you think, ‘is real estate investment trusts a good career path?’ If yes, you can invest in the following types of REITs. 

Types of REITs

Although REITs can be divided into several types, these are some of the main categories of real estate properties that can yield good profits. 

1. Residential REITs

Residential REITs

This type of REITs includes various kinds of residential properties like family rental properties, PGs for students and job holders, and other residential properties. While investing in this type of REITs, you need to consider the following factors: 

  • Consider the population of the state or city. 
  • What are the job opportunities and unemployment rate?
  • What is the vacancy rate of residential properties? 
  • Consider the economic growth of the state or country.

Although these are some of the common factors that you should consider before investing in residential REITs, you should do more research before investing in them. 

2. Retail REITs

Retail REITs

Almost all the retail buildings in the United States are owned by retail REITs. According to a recent report, more than 24% of the total REIT investments are from retail. So, it’s a great percentage of the entire real estate investment trust. 

Before you invest in retail REITs, you should first consider the performance of the retail industry. If you find that the retail industry is performing well, you can then decide whether it will be profitable to invest in retail REITs.

Also Read: How To Manipulate People In 5 Easy Steps

3. Office REITs

Office REITs

As the name suggests, these are investments in office buildings. Office REITs get returns from the rental income from the long-term lease agreements from business organizations. If you are interested in office REITs, keep the following in mind: 

  • What is the employment rate and the economy of the state?
  • Consider the vacancy rate.
  • How is the economy of the area where the particular office REIT invests in? 
  • How much capital of the REIT to acquire office buildings?

However, these are some essential factors; you should do proper research before putting your money into office REITs. 

4. Healthcare REITs

Healthcare REITs

Healthcare REITs are also a great choice because the healthcare cost in the United States is rising every year. This type of real estate investment trusts include hospitals, medical centers, retirement homes, nursing homes, etc. 

So, the healthcare REITs are directly involved in the growth of the healthcare system. Some of the crucial factors to consider before investing in healthcare REITs are the demand for healthcare services, the aging population, etc. 

5. Mortgage REITs

Mortgage REITs

Among all the REITs, mortgage REITs are considered to be less risky. More than 10% of REITs investments are invested in mortgages, and you should consider this as a good investment for diversifying your portfolio. 

However, you shouldn’t randomly choose mortgage REITs, and low risky actually doesn’t mean you will not lose your money. You should consider the interest rate and net asset value. So, you should do proper research and compare different mortgage REITS before investing in them. 

How to Assess REITs

Now that you have understood different types of REITs, their advantages, and disadvantages, you must have got some clarity on the question; ‘is real estate investment trusts a good career path in 2021?’ However, if you are still unsure, here are some factors that will help you assess a REIT properly. 

  • Choose from different REITs that have a good historical track record of high-dividend and long-term capital appreciation. 
  • Choose REITs with better liquidity. 
  • Calculate the FFO (funds from operations) instead of the payout ratio to choose a REIT.
  • One of the best ways is to invest in a mutual fund or ETF that invests in REITs.   

Final Words

Investing in real estate was never so simple that it is today. I hope you get a clear answer to the most asked question; ‘is real estate investment trusts a good career path?’ Even if you have never invested in REITs, it’s not too late. You can still gain significant profits by choosing the right REIT stocks for your investment. Like any other investments, real estate investment trusts.

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Roman Williams
Roman Williams is a passionate blogger. He loves to share his thoughts, ideas and experiences with the world through blogging. Roman Williams is associated with okey magazine & gossipment.

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