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Fincademy

11 Nov, 11 tweets, 2 min read

What are REITs and how can it help small investors diversify their portfolio?

A Thread 🧵👇

1/ Buying properties is an expensive affair. Let alone buying it for investment purpose, you need to have a well-settled job/business before you can even take a loan for buying your home.

2/ Even if you can buy a property, you cannot extensively diversify because of the very high ticket size. So, what can you do if you wish to invest in real estate and earn rental income as well as ride the price appreciation? Answer is :- Real Estate Investment Trusts (REITs)

3/ What are REITs ?
Like mutual funds own a basket of debt and equity securities, REITs hold a portfolio of income generating real estate properties. Investors receive a unit or a share against their investment.

4/ The rental they earn is passed on to unitholders after deducting expenses or reserving to buy a new property. The REIT portfolio may contain commercial properties, shopping malls, hospitals, from different geographical locations.

5/ This means that through REITs, investors, especially retail investors can not only invest in real estate but can also hold a part of a diversified basket of properties. Also, investors do not need to take care of the property operations and maintenance.

6/ A major issue with real estate is liquidity, also gets resolved, because unlike a whole property sale, investors here can easily sell their units/shares on the stock exchange.

7/ But, while trading on stock exchanges provide liquidity, it also increases the correlation with the overall markets, i.e, when stock markets fall, the REIT trading unit price in the market would also somewhat fall alongside in line with the overall stock market.

8/ To sum it up, with REITs, you get exposure to real estate, in smaller investment sizes, with increased liquidity and the benefit of dividends and capital appreciation.

@sneh_kagrana

9/ Currently, there are only 2 REITs listed in the stock exchange i.e., Mindspace and Embassay.

Disclaimer - No recommendation. Sharing for information purpose only.

BY :- @sneh_kagrana

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