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.

Disclosure: Some of the links below are affiliate links, meaning, at no additional cost to you, I will earn a commission if you click through to make a purchase.

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.

READ: How to Monitor Upcoming IPO’s for Free

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.

READ: Common Investing Myths

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.