drewtalksmoney

REITs (Real Estate Investment Trusts) allows you to earn income from Real Estate without the need of having to buy, manage or finance them yourself. Originating from 1960, REITs enabled firms to use captial from investors to purchase Real Estate Portfolios, operating like mutual funds.

REITs have proven to offer decent yields in the past, consistently offering higher returns than bonds and many equities. Another big draw of REITs is that at least 90% of taxable income must be redistributed to investors. This allows them to be exempt from coporate tax, leading to the financing of real estate to be more affordable. However, before deciding to invest, it is important to note that REITs are sensitive to interest rates, and therefore the ups and downs of the market. For example, when interest rates fall, this mode of investment normally outperforms the broad market. 

What is an REIT I should invest in?

Realty Income Corp. (O) is a S&P 500 company which invests in 16000 commercial real estate properties across 8 countries. The fund has a 5.1% dividend yield and is commited to making monthly dividend payments. Over 650 payments have been made since founding. Morningstar has a “buy” rating and a $75 fair rating. The stock has dropped to $57 at the time of writing, which is a good time to buy into this fund.