Investing in Real Estate without actually buying a property
You’ve heard me say before that I don’t think buying a home in your early – mid-twenties is the best idea and while a few people I know have criticized me on this belief, the numbers don’t lie. We are from a generation that has to have everything as soon as possible and as such we aren’t ensuring we are financially ready for home ownership before we jump in. Does that mean real estate is a terrible investment? Of course not.
You can invest in property without throwing all of your life’s savings into a home, and Real Estate Investment Trusts (REIT’s) are just the way to do it.
What is a REIT?
“A REIT is a company that owns, and in most cases, operates income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and even timberlands.” – Wikipedia
Essentially you own a piece of a company that is well diversified in real estate. Think of REIT’s like stocks, you buy and sell them on the market and they pay you dividends and hopefully increase in value over the time period you hold them.
For myself, I’ve just started purchasing some shares in a REIT. Most of the REIT’s I was looking at were at a price point of about $20-$30 per share, which is significantly less than the cost of buying a condo.
For those of you that are feeling like you’re behind your peers because you haven’t bought a house/condo/whatever, this is the perfect way to invest some money in real estate without putting your whole financial house (pardon the pun) on the line. REIT’s don’t just invest in residential markets either, they diversify into commercial real estate, which is something a lot of young investors couldn’t fathom doing for many years. Many REIT’s also offer a pretty decent dividend, I’ve seen as high as about 5-7% yield.
You can also purchase a REIT ETF if you aren’t interested in buying specific shares in each company, which is something I might consider if I ever decided to invest in international property.
Overall, I would say a REIT is a pretty good way to add some real estate to your investment portfolio without having to take on a mortgage!