If you are keen on real estate, you needn’t just own physical property. You can also buy the shares of a Real Estate Investment Trust (REIT). A REIT is a company that owns and manages income-generating real estate assets. REITs offer five key advantages:

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Affordability

Unlike buying physical properties, REITs can be purchased with small initial outlays. They offer a more affordable investment proposition.

Diversification

You can diversify your risk exposure by different geographic locations and property types from apartments and offices, to shopping centres, hotels, hospitals and warehouses.

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Low correlation

REITs tend to have low correlation to equities, largely due to their more predictable income stream which in turn reduces their share price volatility.

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Income generation

As REITs are required by law to distribute at least 90% of taxable income to shareholders each year, you can be assured of receiving a regular dividend income, although the amount may vary each year.

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Liquidity

The ability to easily buy and sell units in REITs makes them a liquid proxy to physical real estate.

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