You've heard of stocks and bonds, I'm sure of it. But for the majority of my clientele, they haven't heard of this other investment vehicle: REITs.
What are REITs?
REITs stand for Real Estate Investment Trusts.
They are a great way for young investors like you and I to get involved in real estate when we don't have enough money to invest in a condo or house at this age.
Why should I buy a REIT?
Have you noticed how a majority of people's wealth is a result of their dealings within real estate? I've noticed a lot of my mentors and people I look up to have built their wealth and life thanks to real estate, saving and investing, and building quality businesses.
REITs are a great way to get exposure to real estate with its income and growth.
How do I make money from REITs?
They provide a monthly return in the form of rent. Over time, they provide capital growth with land values growing.
Remember: there is only so much land on Earth. As long as there are people and population growth, the basic need for shelter will continue to propel the demand for real estate.
What are the advantages of REITs than to purchase physical real estate?
Well, at our young age, most of us probably don't have enough money to put a down payment on a house or condo, especially if you're living in cities such as Toronto or Vancouver.
REITs allow for you to invest into real estate on a small scale, per unit. You buy into these trusts and become a unitholder.
The beauty of being a unitholder of a REIT is you get to own a small piece of a portfolio of real estate. Think about owning a fraction of hundreds of quality buildings all around Canada and even the States, and having tenants pay you rent each month. Most of those huge buildings in downtown Toronto are owned by REITs that you and I can buy a piece of!
Plus, you have a team of employees and executive management taking care of the portfolio and ensuring growth for your investment while taking care of the day to day tasks of being a landlord. Being a landlord yourself is not always an easy task: finding qualified tenants, maintenance of the property, renovations, etc. With REITs, sit back and let your investment team do the work!
In conclusion, getting into physical real estate is the big goal. Although our generation has been having second thoughts of home ownership, the dream is still alive in many, and real estate ownership is still something many of us strive for. Myself included.
Using REITs to be exposed to real estate while we are building our wealth now will give us a chance to bring up that down payment for our first home.
And that's a bit about REITs!
Want to learn about stocks? Click here.
Bonds? Here you go!