REITs allow investors to gain real estate exposure without owning physical properties. They offer liquidity and dividends but come with unique risks.
Key Takeaways
- REITs provide real estate exposure without property management.
- They offer high dividends but are subject to stock market volatility.
- Some REITs focus on specific sectors, such as commercial or residential properties.
Pros of Investing in REITs
- Diversification – Invest in multiple properties with one share.
- Passive Income – REITs must distribute at least 90% of income to shareholders.
- Low Entry Cost – Start investing with as little as $100.
Cons of Investing in REITs
- Stock Market Dependence – Prices fluctuate with the market.
- Limited Control – Investors don’t make management decisions.
- Taxable Dividends – REIT dividends are often taxed as regular income.
FAQs
Q: Are REITs a good alternative to rental properties?
A: Yes, they offer real estate exposure without direct management, but returns may differ.
Q: Can REITs lose value?
A: Yes, REIT share prices can decline based on market conditions.