The deeper you go into the topic of real estate investment, you the more you realize that it is quite deep and complex. Buying a property, keeping it for some time, and then selling it back into the market is a common way people think about making money from real estate investing. However, there are more ways than one could imagine to benefit from this market. Anton Senderov thinks that new and aspiring investors should know about REITs as well.
A lot of the times, new investors are completely unaware of this particular type of investment vehicle. They keep looking for vacant lands and properties, but don’t realize that there is a better way to diversify their portfolio. Here is what Anton Senderov has to say about REITs.
The Concept of REITs
Firstly, you have to know what the abbreviation REIT stands for. It stands for Real Estate Investment Trusts. This should immediately give you the hint that you are not going to invest directly in a property. Instead, you will be investing in a company that invests in real estate properties and business. These companies own and run several commercial real estate buildings and rent them out to several types of businesses. When you invest in the company, you own a small share in its returns. This means that when this company generates revenue, you get a part of it in the form of dividends.
The best thing about this type of investment is that you continue to make money over the course of many years. The good news is that their dividends are pretty attractive too. However, you have to find the best performing REITs if you really want to make an income.
Here are some things you have to consider before you start investing in REITs.
Know the Type of REIT You Want to Invest In
Anton Senderov says that there are two main types of REITs and you have to be very careful with which one you pick. According to him, you will be taking a risk with either of them but it is simply a question of which one you find more appealing.
You have the equity REITs that are companies that own many properties. They own these properties and it is in their hands to manage them from start to finish. This means the properties are in their name, they run all of their management operations, collect the rents from the occupants, and distribute the dividends among their shareholders.
On the other hand, you have mortgage REITs. These are also large companies but they are not landlords like equity REITs. These are companies that invest in buying other financial instruments such as taking over the responsibility of a lender. In other words, you can think of a company that takes over a mortgage from a bank by buying it out and collects the payments from the homeowner.
It is true that there are companies that work based on both models but there are very few of them on the market.
Perform Your Research on the Best Ones
The best thing is that there are publicly traded REITs whose information is easily available on the internet. If you want to know about them, a casual search on Google is enough. You can see how well they have been performing and then you can invest some portion of your savings in those companies. However, you have to know that there are non-public and private REITs as well. How much an REIT is regulated matters a lot before you select one.
Be very careful when you pick a company to invest in. It’s like investing in the stock market. You have to take a risk to expect a reward. Anton Senderov believes that you should spend time in researching and it should not hurt you to research for a few months before you finally make up your mind that you want to go on this path of investment.