New investors are rarely risk-hungry. Knowing that investing is like educated gambling in that luck can turn bad in a blink, they prefer to take it slow, establish balanced portfolios, and cultivate investments that are easy to liquidate if they get spooked. As a result, few beginner investors put money into real estate properties; most consider REITs, instead.
REITs, or real estate investment trusts, are securities invested in real estate property or mortgages and traded on major exchanges. An extremely liquid way to invest in real estate, REITs offer high dividend yields without the commitments (or headaches) of owning property directly.
Still, not every REIT is right for every investor, and new investors particularly should look for diversified, high-quality REITs which allow balance and slow, reliable growth. Since most REITs specialize in a single property type, REITs for beginner investors can be difficult to find. Let’s take a look at some of the best REITs to invest in.
What Are REITs?
Before we talk about some of the best REITs to invest in, let’s first take a deeper look at what exactly a REIT is.
REITs offer a unique opportunity to invest in real estate without having to purchase physical property. REITs are publicly traded companies that own and manage income-producing real estate such as office buildings, shopping centers, apartments, and hotels. REITs provide investors with a steady stream of income through dividends and capital appreciation. They also offer the potential for long-term growth and stability.
When investing in REITs, it is important to remember that they are subject to market fluctuations and can be affected by economic conditions. Additionally, you should always research each REIT thoroughly before investing and make sure that you understand the risks associated with each investment. Finally, it is important to monitor your investments regularly and adjust your strategy as needed.
How Do I Pick The Right REIT?
When choosing the best REITs to invest in, it is important to consider factors such as geographic diversification, tenant mix, leverage levels, liquidity, management quality, financial strength, dividend yield, and total return potential.
It is also important to research each REIT’s portfolio of properties and its track record of performance over time. Additionally, you should consider the company’s dividend policy and its ability to generate consistent cash flow.
By doing your due diligence and researching the best REITs to invest in, you can ensure that you are making a wise investment decision.
What Are Some of the Best REITs to Invest In?
Below are what Modest Money feels are some of the best, and safest, REITs to invest in:
W.P. Carey Inc.
W.P. Carey Inc. (NYSE: WPC) is a global REIT, operating more than 900 properties in 19 countries — though two-thirds of those properties are in the U.S. The company’s portfolio is diverse, including primarily commercial properties including offices, industrial properties, and retail and warehouse space. Impressively, W.P. Carey maintains a 99.1 percent occupancy rate, claiming well-known tenants such as U-Haul and Marriott.
A triple net-lease REIT, W.P. Carey’s tenants are responsible for variable expenses, such as maintenance, building insurance, and property taxes. As with other net-lease REITs, W.P. Carey maintains long-term leases — between 10 and 25 years — with built-in rent increases. This minimizes income volatility, making WPC an excellent beginner REIT.
Vornado Realty Trust
Perhaps the largest REIT — not just of its kind but of all REITs — Vornado Realty Trust (NYSE: VNO) focuses entirely on office and retail space in the New York City area, investing primarily in buildings in Manhattan. By doing so, Vornado has become the top operator of NYC street retail, notably holding many properties in coveted areas like Fifth Avenue and Times Square.
New York is easily one of the strongest real estate markets in the country — not to mention the world. In every decade, the value of New York’s Class A office buildings has doubled, proving Vornado’s strategy to be not just viable but exceedingly profitable.
Empire State Realty Trust Inc.
Another REIT that operates primarily in New York City, Empire State Reality Trust (NYSE: ESRT) invests almost exclusively in office buildings — including the Empire State Building, owned and named by the REIT and One Grand Central Place. More than 93 percent of its holdings are office space, with the remaining 7 percent a smattering of retail properties.
Empire State is one of the top REITs to invest in. While it is not nearly as diversified as other REITs on this list, it remains an ideal option for beginners because it has promised (and proven) enhanced growth potential. The company has a long history of success and has consistently delivered strong returns for investors over time.
By focusing on leasing vacant space (which amounts to more than 1 million square feet) and maximizing income in other ways, Empire State has increased its releasing spread to 22.4 percent, which is nearly double its peer group average.
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EPR Properties (NYSE: EPR) prides itself on being a specialty REIT that invests in unique, non-commodity market segments — such as entertainment, recreational, and educational properties. For example, within EPR’s portfolio, investors will find multiplex cinemas, waterparks, and golf facilities as well as public charter schools, private schools, and early childhood education institutions. Like W.P. Carey, EPR is a triple net-lease REIT, eliminating nearly all turnover risk and volatility.
EPR’s investment philosophy is focused on the millennial mindset, which prioritizes experiences over material goods. Furthermore, the demand for quality education facilities continues to grow. In all, EPR’s strategy might seem unconventional, but it is no less promising than other REITs.
VEREIT, Inc. (NYSE: VER) is a large, well-diversified REIT that owns more than 4,100 properties. Still, it is perhaps the riskiest REIT on this list because most of its portfolio consists of retail and restaurant properties, which have remained in notoriously bad shape thanks to the Great Recession and competition from e-commerce.
Fortunately, VEREIT invests primarily in discount-oriented, non-discretionary, or service-based businesses, all of which promise to compete well in the current market. Plus, VEREIT claims more than 98 percent occupancy, with an average of 10 years left on leases, so new investors can buy in now and ride out the retail REIT drama.
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Digital Realty Trust
Digital Realty Trust (NYSE: DLR) is a REIT that specializes in data centers and technology-related real estate. The company owns and operates more than 200 properties in the U.S., Europe, Asia, and Latin America.
Digital Realty Trust has a strong track record of delivering consistent returns for investors over time. The company also offers an annual dividend yield of 4.3 percent, making it an attractive option for income-focused investors.
In addition to its strong fundamentals, Digital Realty also has an experienced management team that is focused on creating value for shareholders through strategic acquisitions and development projects. The company’s portfolio is well diversified across different markets and regions, which helps reduce risk for investors.
Public Storage (NYSE: PSA) is one of the largest self-storage REITs in the world with more than 2,400 facilities across the U.S., Europe, and the Asia Pacific regions.
Public Storage is a great option for investors looking to diversify their portfolios with a REIT that has a proven track record of success. Public Storage offers investors access to a wide range of properties, including residential, commercial, industrial, and mixed-use facilities.
The company’s portfolio is well diversified across different markets and regions, which helps reduce risk for investors. Public Storage also has an experienced management team that is focused on creating value for shareholders through strategic acquisitions and development projects.
In addition to its strong fundamentals, Public Storage also offers investors attractive dividend yields. The company currently pays out an annual dividend yield of 3.3 percent, which is higher than the average for REITs.
American Tower Corporation
American Tower Corporation (NYSE: AMT) is a REIT that owns and operates more than 170,000 communication sites in the U.S., Latin America, India, and Africa. The company’s portfolio includes cell towers, small cells, distributed antenna systems (DAS), fiber networks, and other wireless infrastructure.
American Tower has a long history of providing strong returns for investors. The company also offers a dividend yield of 2.2 percent, making it an attractive option for income-focused investors.
Ventas, Inc. (NYSE: VTR) is a healthcare REIT that owns and operates more than 1,200 senior housing, medical office buildings, skilled nursing facilities, and other healthcare-related properties.
The company has a long history of providing strong returns for investors and currently offers a dividend yield of 4.6 percent. Ventas also has a well-diversified portfolio that includes properties in the U.S., Canada, and the United Kingdom.
In addition to its strong fundamentals, Ventas also has an experienced management team that is focused on creating value for shareholders through strategic acquisitions and development projects.
Iron Mountain (NYSE: IRM) is a REIT that specializes in storage and information management services. The company owns and operates more than 1,400 facilities across the U.S., Europe, Latin America, and Asia Pacific regions.
Iron Mountain has a strong track record of delivering consistent returns for investors over time. The company also offers a steady dividend income of 5.3 percent, making it an attractive option for income-focused investors.
In addition to its strong fundamentals, Iron Mountain also offers investors access to a wide range of properties, including data centers, warehouses, and other specialized storage facilities. The company’s portfolio is well diversified across different markets and regions, which helps reduce risk for investors.
Healthcare Trust of America
Healthcare Trust of America (NYSE: HTA) is one of the largest healthcare REITs in the U.S., with more than 1,400 properties across the country. The company’s portfolio includes medical office buildings, hospitals, senior housing facilities, and other healthcare-related properties.
Healthcare Trust of America has a long history of providing strong returns for investors. The company also offers an attractive annual yield of 4.7 percent, making it an attractive option for income-focused investors.
In addition to its strong fundamentals, Healthcare Trust of America also has an experienced management team that is focused on creating value for shareholders through strategic acquisitions and development projects within the health care industry.
Are You Looking For The Best REITs to Invest In?
These days investing exclusively in the stock market can put your money at a greater risk. In this current economy diversifying your portfolio is key if you want your portfolio to continue to be profitable.
Whether you are an income-focused investor, an institutional investor, or someone who is new to the investment game entirely, REITs are a great way to diversify your portfolio safely and hedge against inflation.