To The Moon

What are REITs? Why Configure REITs?

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Source: https://passiveinvestingaustralia.com/

6 Keypoints of REITs:

1. Definition:

REITs is Real Estate Investment Trusts Funds. It is an investment vehicle similar to a closed-end mutual fund, but the investment object is real estate.

2. Origin:

The investment trust was created by the U.S. Congress in 1960, mainly through the securitization of real estate and the fundraising of many investors.

Investors without huge capital can participate in the real estate market with a lower threshold and obtain real estate market transaction rents and profit from value added.

Investors do not need to substantially hold real estate targets, and can trade in the securities market, and the market liquidity is better than real estate.

3. Source of income:

The characteristic of real estate investment trusts is that the main income of the trust comes from rent, so the income is relatively stable, and the trust must also use most of the future surplus as dividends. Because of this, REITs pay much higher dividends than average stocks in the market.

1) Dividend 90% of rental income distributed to investors

2) Management and maintenance costs of the property

3) Capital gains. Shares rose. The price of real estate itself can be anti-inflation, and the acquisition and acquisition make it more valuable, and the real estate leverage ratio is high

4. Types of Reits:

Includes industry, data center, commercial real estate, logistics, infrastructure, highway, sewage treatment, etc. You can do only one section at a time, or you can do all of them. Logistics sector: high barriers: because the government grants land.

5. REITs Funds:

Refers to mutual funds that use real estate securitization commodities as investment targets, including REITs, commercial real estate mortgage-backed securities, and commercial real estate secured debt certificates.

6. Net Worth Performance:

Can direclty check on Tiger App or Yahoo Finance.

8 Benefits of Configuring REITs?

1. Comparison between Reits, Stocks and Bonds:

• REITs have stable quarterly/half-yearly dividends, the rental income is mainly used as dividends or coupons.
• Some stocks have dividends, but the long cycle or unstable dividends are related to other factors such as profitability.
• Bonds’ dividends come from the coupon rate, and the average payout ratio lower than REITs.

2. Steady total returns:

According to general observation, the risks and rewards of REITs are about between stocks and public bonds.

One reason is because that REITs have the value-added income of the underlying assets (stock attribute); the other is that REITs have mandatory dividend income (bond attribute),

3. Low volatility

4. High dividend payout：As Rent-to-sales ratio is associated with first-tier cities.

5. Risk diversification: REITs invest in multiple real estate targets at the same time, which can diversify risks.

6. Anti-inflation: Due to the characteristics of its real estate, real estate investment trusts are particularly advantageous in fighting inflation.

7. Small proportion of capital: Invest smaller compare to invest a house in first-tier cities directly.

8. Professional property management: Compared with buying a house by yourself, it saves time and worry with concentrates professional management.