Real estate packs a powerful punch for your portfolio. By purchasing shares of a real estate investment trust (REIT), any investor can easily gain access to this vast and powerful asset class. REITs are especially good for younger people or renters who lack any exposure to real estate. In this episode I’ll teach you the basics of investing in REITs, what to watch out for, and how to get started. I also go through a list of my favorite choices to help you find some that may be right for you.
Section 1: Background & Basics
- What is a REIT? How is a REIT different from a stock?
- Listing types
- Types of investments held within REITs
Section 2: What Determines the Price?
- Other financial conditions
- Societal trends & demographics
- How to pick a good time to add to, or to reduce, your REIT holdings
Section 3: Why You Should Own REITs
- Exposure to hard assets that produce good cash flows
Section 4: Areas to Examine When Selecting a REIT
- Equity REITs vs. Mortgage REITs: Very different!
- Debt: levels & maturities
- Exposure to troubled entities
- Concentrated portfolios
- Tax treatment (United States)
Section 5: How to Begin Today
- Determine if you are ready to purchase now, or should wait
- My earlier episode on sample asset allocation grids, along with the latest version of the accompanying spreadsheet
- REIT exchange-traded funds (ETFs)
- VNQ (Vanguard REIT ETF): The largest; has the lowest expense ratio (0.12%)
- IYR (iShares US Real Estate ETF): Like VNQ, highly liquid and lots of option contracts available
- RWX (SPDR Dow Jones International Real Estate ETF): International real estate
- REM (iShares Mortgage Real Estate Capped ETF) – Has REITs that hold residential and commercial mortgages
- RES (iShares Residential Real Estate Capped ETF) – Residential, self-storage, and health care
- MORT (Van Eck Vectors Mortgage REIT Income ETF) – Another mortgage REIT ETF, low expense ratio
Intro music by audionautix.com