REIT stands for real estate investment trust, which allows people to invest in portfolios of real estate assets in the same way that they invest in a portfolio of other securities, like mutual funds.
If you want to start investing in REITs but do not know what to do, here is a step-by-step guide. Read the article to learn How to invest in REITs.
1. Understand how REIT works
REITs are firms that invest in real estate income-producing assets. REITs are enhanced than mutual funds. Rather than investing in one of two properties, REIT allows one to invest in a portfolio.
In this way, the REIT provides the chance for investors to take benefits from real estate investing without buying their properties. Here are the different types of REIT investment and different kinds of properties
- Hotels
- Office buildings
- Retail centers
- Self-storage buildings
- Apartment complexes
Like stocks, REITs are also listed on the main stock exchange, allowing investors to purchase the shares easily.
2. Know the REIT risks
Even REIT is a popular way to invest in a property portfolio without buying it. But still, there are some potential risks involved in REIT investment, especially that are not traded on major stock exchanges. Here are some of the risks of REIT investment in India.
- Non-traded REITs take higher upfront fees from investors. In this case, it is tough to buy and sell the shares for investors.
- REITs are not traded publicly, and it is tough to make previous research performance.
- The REIT trade on the major stock exchange affects the tax bill at the end of the year. So, in this case, it is difficult for you to determine the right type of property to invest in.
3. Make a plan for how much you afford to invest.
After understanding how REIT works and the associated risks with REIT, you should make the plan based on your budget and determine how much you afford to invest in REIT or how much money you are ready to put at risk.
So make your affordability plan in advance so that you feel surprised if you face any losses from REIT investment.
4. Select REIT to invest
Now, you have to choose the appropriate REIT to invest in. If you are investing in REIT for the first time, you have to check the previous REIT performance and the track record of REIT managers to determine whether they performed better.
It is suggested to choose the REIT to invest in that is widely diverse and allows you to diversify your investment portfolio with multiple REITs
5. Open the brokerage account.
Once you choose the REIT to invest in, you must open your brokerage account to make trades. After opening the account, you must make the initial deposit and start trading on major stock exchanges with REIT investment.
Conclusion
Hope from the above steps you understand how to invest in REIT. If you are still unsure how to start investing in REIT, you should consult financial advisors who will help you develop the proper plan for your investment portfolio.
