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Financial analysts tout the advantages of REITs

On Behalf of | Oct 16, 2015 | Commercial Real Estate

Real estate investment trusts may be of interest to retirees and other Kansas investors who want to diversify their portfolios. These financial vehicles are backed by federal laws that require them to pay the majority of their income to shareholders in the form of dividends and, since they are traded on the market, REITs are a liquid investment. REITs offer investors who are interested in commercial real estate but who find the barriers to financial entry to be too great a chance to passively participate.

Real estate investment trusts are a way to mitigate risk in smaller portfolios and that they make it easier for people to invest in otherwise inaccessible assets. Investors can choose from mortgage REITs that derive income from debt financing and mortgage-backed securities or equity-based vehicles that purchase properties directly.

Equity REITs typically focus on specific property types, so investors can buy into commercial, retail, residential and other asset classifications based on their needs. Because investors are permitted to purchase shares by working with their choice of financial advisers, stock brokers and fund managers, they may be able to exercise more control over their portfolios’ contents.

Although investors have numerous options for creating diverse portfolios, it is important to learn how different investment strategies might impact the viability of future endeavors. The returns gained by purchasing shares in an REIT will often depend on external issues, like ongoing commercial development, local market trends and other valuation factors. Regardless whether they buy REIT shares independently or as part of a managed fund, investors may benefit from consulting with their legal and financial advisers about the specific purchases they propose to make.