types-of-reits

What Are The Different Types Of REITs | How To Invest In REITs

Posted by

Real Estate Investment Trust, or REIT as it is popularly known, is like mutual funds that invest in a specified sector – the real estate. Investment in REITs gives investors more benefits because of low investment and high liquidity factors. Since most of the REITs are listed on all major exchanges, buying and selling are much easier. 

If you are looking forward to entering the real estate sector indirectly and are interested in REITs investments, it is imperative to know the different types of REITs. It would help you in deciding on your investment portfolio.

types-of-reits

The different types of REITS

There are two major categories of REIT investing. 

  • Equity REITs
  • Mortgage REITs (Also known as mREITs)

Both equity REITs and mortgage REITs are traded on all primary stock exchanges, excluding private or non-listed REITs. Public non-listed REITs or PNLRs are not traded through any exchange. The buying and selling of these REITs are limited to the secondary markets. Transactions in private REITs are done only through institutional investors.

With mREITs, the income is created from the interest received by investing in commercial and residential mortgages. Approximately 10% of the total REIT investments are in mortgages. These REITS also generate income from mortgage-backed securities. REIT investing in both mortgage assets and property is known as hybrid REIT.

Money in equity REITs is earned from the dividend income generated from the ownership of long-term assets in various industries like hospitality reits, retail reits, infrastructure reits, healthcare reits, and many others. 

Also Read

Let us look into the equity REITs and their various sectors.

Retail REITs

Retail REIT usually concentrates on three categories – shopping centres, malls, and freestanding or net-lease properties. Approximately 24% of the total REIT ( as per information updated on investopedia.com) investing is in shopping malls and freestanding retail. 

Healthcare REITs

If one sector is booming, it is the healthcare industry and its related real estate. A healthcare REIT investment is in properties like medical office buildings, hospitals, skilled nursing homes, and senior living communities. Since the need for health care would never cease.

Industrial REITs

Industrial REITs invest in warehouses, factories, and distribution centres. Also known as logistics REIT, these are good investment options. Industry giants like Amazon run extensive distribution centres and warehouses across the country that are primarily funded by industrial REITs. 

Hospitality REITs

Hospitality REITs primarily invest in hotels and resorts. However, there is further diversification in hospitality REITs. These REITs can invest in cafes, restaurants, and other properties within the hotels and resorts. Thus, income earned is earned from multiple sources, making it an attractive investment option.

Data Center REITs

The majority of the corporate houses store their data on servers located in offsite locations under extensive security. Datacenter REITs invest in all such properties where servers are placed. With the increasing dependency on digital life, investment in data centre REITs will always remain a prudent choice.

Infrastructure REITs

Infrastructure REITs deal with such real estate that provides land and building for constructing the infrastructure of the various industries like telecommunication, oil and gas industry, and many more. This includes space for telecom and wireless towers, fiber cables, and energy and gas pipelines.

There are a few other types of REITs like Office REITs which invest in large and specialized office spaces, and Residential REITs that invest in multifamily dwellings and apartment complexes.

Then there are the Diversified REITs that focus on multiple sectors. These REITs generate income from two or more types of properties. If you are looking forward to a diversified portfolio, diversified REITs are a wise investment option.

How will you invest in REITs?

how-to-invest-in-reits

As an individual, you may purchase shares in a REIT just like any other public stock. Most of the REITs are listed on the major stock exchanges. You also have the choice of purchasing shares in a REIT Exchange-Traded Fund (ETF) or a mutual fund.

You can contact your financial advisor, financial planner, or a broker who can help you analyze your financial objectives and recommend the right REIT investment.

To know more about the comprehensive list of REIT and publicly traded real estate companies, you can click on the REIT Directory.

Like any other investment, REIT investments also carry a certain amount of risk. However, what goes for the REITs is that they are a great way of diversifying investments outside the traditional formats and are attractive for their long-term capital appreciation and strong dividends.

Please follow and like us:

Leave a Reply

Your email address will not be published.