Why Every Real Estate Investor Should Consider REITs Investing

The Pros of REITS Investing: Owning a Property Without the Hassle

Before the industrial revolution, a person's status in the world was primarily measured by how much land he/his family owned. Even though the 20th century bore the rise of stock and bond ownership, it is still profitable to go into real estate investing via an asset allocation program. REITs investing (real estate investment trusts) can be a free-of-hassle way for the typical real estate investor to profit without having to face the day-to-day inconvenience of direct property acquisition.

Before the 60's, there was no way a person of average background could garner the financial resources needed to take part in large-scale real estate investing projects such as hotels and shopping malls. As a result, the US government passed the REIT Act of 1960. This legislation was put in place as a hope that real estate investors would come together and pool their wealth in order to create companies with great assets. This way, the average USA resident would be offered the same opportunities as though in the elite class. 

It worked. 

The first REIT formed only three years later. 

Read on for my take on the four best REIT investing pros and why every real estate investor should consider it. 

What is REITs Investing?

REITs investing is a special type of real estate investing that combines the best aspects of a real estate investment and regular stock investing. This unique class of investment offers chances for the average real estate investor to earn massive returns from the market with a much smaller commitment. 

REIT Investing Pros #1: Begin with Minimal Commitments

You do not need to be a multi-millionaire in order to begin investing in REITs. It can be traded publically like all other items on the stock market, so you can buy into a REIT from typically any brokerage. 

This is great because typically a single share will go for around a couple hundred. Compare that to direct real estate investment which can cost anywhere between $10,000 to $100,000+ to actually started and you can see that REITs investing require a much lower financial commitment. 

However, there are many other added benefits that REITs investing offer beyond just the typical minimal financial input. 

REIT Investing Pros #2: Someone Else Will Take Care of the Issues

If you decide to go down the direct real estate investment route, then the responsibility to screen the tenants, collect the rent, repair the issues etc. will fall on you. Yes, you will always have the option to hire a property manager to be in charge of these things, but this will skim 10% of your profits just to do so. Meanwhile, if you opt for a REITs investment, you won't ever have to worry about ever needing to deal with these trivial and inconvenient matters. 

According to state and local laws, Landlords hold the responsibilities to upkeep their properties and maintain a certain level of maintenance. More importantly, a lot fo these repairs need to happen ASAP in order to avoid further damage from happening. Honestly, I doubt there is a single small to mid-scale real estate investor out there who doesn't have a horror story about needing to deal with a problem in the middle of the night due to emergency repairs. But, if you invest in REITs, you won't ever need to deal with these unforeseen issues. 

REIT Investing Pros #3: Earn Profit Through Dividends

So far, you have probably seen that REITs almost look exactly like regular stock. In a lot of ways, this is true. But, there are a few specific rules that surround REITs, making it look far more attractive than your usual stocks. 

For example, one of the greatest benefits is the fact that REITs are required by law to share at least 90% of their taxable income to their shareholders as dividends. This is far better than some stocks who don't pay any dividend at all!

REIT Investing Pros #4: Diversify Your Portfolio Instantly

One of the major ways many real estate investors fail is when they do not properly calculate the costs to maintain or repair their property. 

For instance, if you owned 5 properties and you had a massive repair that needed to take place for one of them, this could ruin your real estate investment return for your entire portfolio of properties. While a $10,000 repair might not be a biggie for someone in the major leagues of real estate, if you are a small time player and only own a few properties, this can completely kill your profits!

So, similarly to how you wouldn't place your entire life savings on a single horse, you shouldn't be so fast to place all your eggs in one basket in real estate. However like I mentioned before, due to the fact that buying a property can cost you big time, it isn't easy to diversify your portfolio. 

But, if you opt for REITs investing, you will have a much easier time having a share in hundreds of properties and a little expense won't be as big of a deal - and your profits for the year won't be wiped out all in one go!