Real Estate Investment Advice

Best Investment Method

• My First Investment advice for real estate investment trust, otherwise known as a REIT.
• Imagine your friend collects a hundred dollars from 1,000 people, giving him $100,000. He then uses that money to buy a property, rents it out, and shares the rental income with all 1,000 people who helped him buy it. That’s a simple way to explain a REIT. It allows anyone to invest in properties without needing to buy one themselves. Think of it like you own the front door, someone else owns a window, and a few others own the bricks, which means together, everyone owns the entire property and shares in the profits.
• The learning curve, I’m gonna say it’s moderate, and that’s because getting started with REITs is much easier than buying physical property. It’s not like you need a huge down payment or a mortgage, and there’s no need to deal with agents or solicitors. However, you do need to understand how REITs work. They own things like offices, shopping centers, apartments, hotels, and much more, and they get their income through rent. For passive income potential, I’m gonna say this is great. REITs are well known for paying high dividends.
• This is because the law says they have to pass on at least 90% of all their profits to investors. So as long as the REIT is doing well and its properties are rented out, you can earn a steady stream of passive income. Most businesses sign long-term leases on their commercial properties. Therefore, most of the time, income is pretty stable and reliable. But of course, just keep in mind that your earnings depend on the REIT you pick and the types of properties it owns. For tax efficiency, . This is because in many countries, REITs offer great tax benefits. For example, in the UK, you can hold REITs in a stocks and shares ISA, which means you don’t have to pay taxes on your profits or dividends. In terms of risk, I’d have to say this is medium. REITs are generally less risky than buying a single property, because they invest in multiple properties, spreading out the risk.
• However, they’re not risk free. If the real estate market takes a downturn or if the REIT struggles to keep its properties rented, you might see both a drop in dividends and the value of the investment. So what’s my investment worth now? Let’s flashback to me making the investment four years ago. I’m gonna use the Trading 212 website to put a hundred dollars into a similar REIT. Ready for the moment of truth? Looking at my investment now, I can see it’s worth $98.59 cents, (cash register dinging) so that’s a a small loss of 1.41%.
• This shows that even though REITs are normally more stable than individual stocks, they’re not guaranteed to perform well. My REIT likely underperformed because it invested in commercial real estate, which struggled during the pandemic, but that’s not the end of the world. As I made $11.93 cents back in dividends, meaning I’m actually $10.52 up, (cash register dinging) so that’s (eraser squeaking) 10.52% up