How to Invest in REITS?

What are REITS?

A real estate investment trust (REIT) is a company owning and typically operating real estate which generates income.

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Why invest in REITS?

REITS investing offer a good way for individuals to invest in real estate. They are more liquid and offer a predictable stream of dividend income. This is because REITS are legally required to distribute at least 90% of their taxable income to investors.

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Factors to Pick your REITS

1.Highest yield – 5- 6% – to beat inflation rate

2. Distribution Per Unit (DPU) consistency

3. Net Asset Value Per Share (NAVPS) < Bid Price – to see if undervalued

4. Adjusted Funds from Operation (AFFO) – the ‘real’ Cash Flow

5. Leverage < 30%

6. Debt/ Equity ratio < 60%

7. Interest Coverage Ratio > 5%

8. Rental Occupancy

9. Rental Reversion – Positive is better

10. Undervalued Price/ Book ratio < 1

11. Diversification – property categories

12. Weighted Average Lease Expiry – improving market, choose shorter lease. Deteriorating market, choose longer period.

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Investing in REITS is a good way to earn dividend income and not let your cash lay idle. Readers who are keen to trade with Interactive Brokers can sign up via my referral link today.

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