Showing posts with label passive income. Show all posts
Showing posts with label passive income. Show all posts

Friday, January 19, 2024

Passive income - Investing in real estate trusts (REITs)

 Your personal key to unlocking the booming world of real estate without the daunting costs and hassles of direct ownership. Investing in REITs can be a reliable way to generate income and capital growth. REITs are publicly traded companies that own and manage real estate. They are required to pay at least 90% of their net income in the form of dividends to their shareholders. There are several reasons why REITs can be sound investments: They are regulated by the Securities and Exchange Commission (SEC). This means that they must meet several requirements to be listed and traded on the stock market. These requirements include public disclosure of financial information, which helps investors make informed decisions. They have a long history of profitability. REITs have been around for over 50 years and throughout that time have provided investors with steady income and capital growth. They are diversified. REITs can invest in various types of real estate, including offices, residential, shopping centers, and logistics facilities. This helps diversify risk and reduce the impact of negative events on REIT returns. Of course, no investment is completely risk-free. REITs are subject to several risks, including:  

Risk of changes in real estate prices. Real estate prices can change based on several factors, including the state of the economy, interest rates, and supply and demand. Risk of changes in rents. Rents are subject to change based on tenant supply and demand. Risk of REIT financial distress. A REIT may encounter financial problems if it fails to properly manage its assets or if it encounters unexpected expenses. Despite these risks, REITs can be a reliable way to generate income and capital growth. When investing in REITs, it's important to do your research and choose REITs that are well-managed and have strong financials. Here are some tips on how to make your investments in REITs more reliable: Diversify your investments. Don't invest all your money in one REIT. Instead, invest in a portfolio of different REITs that are invested in different types of real estate. Choose REITs with a long history of profitability. This will give you a better idea of how the REIT will perform in the future. Choose REITs that are well-managed. Look for REITs that have a strong team of managers with real estate management experience. Choose REITs with strong financials. Look for REITs that have high levels of yield and low levels of leverage. By following these tips, you can increase your chances of success investing in REITs.

I personally have close to 15% of my portfolio in such investments. To be honest, while I have rented properties, I often have problems when a tenant leaves the property. It should be cleaned up after it and the problems fixed. When investing in REITs, I only receive dividends. I receive income every three months. Of course, there are always taxes on the dividend.

author Sezgin Ismailov

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