Times have evolved profusely. With this, the real estate world has been transformed as well. Earlier, a small dream of purchasing your own house someday was admirable enough.
Now, investing your money in multiple financial instruments at present is considered smarter. Presently, real estate is a humongous investment umbrella that offers expansive opportunities to investors. There are multifarious investing instruments under it.
Investing in properties i.e. commercial and residential are just one aspect of the realty sector. Investing in real estate stocks is abuzz these days.
A real Estate Investment Trust or REIT is a trust or a company that deals in property finances and its management. The income earned through this is shared in the form of dividends and interest among the shareholders. Equity Reit, Mortgage Reit, Hybrid Reit, Publicly Traded Reit, Non-Publicly Traded Reit, and Private Reit are some of the trading-based REIT options.
Let us compare the two significant realty investment stocks.
Equity Reits are those types of securities that are income-producing. They are a part of those companies that deal in managing such properties that generate income on a regular basis.
Leasing the property and earning regular rentals is the prime goal. For instance properties such as hotels, schools, hospitals, malls, etc. fall under this category. Once, the money starts flowing into the company/trust clears off the dues and other bills.
Post that, the leftover income is distributed in the form of dividends and interests to the investors/shareholders. Apart from producing money through rentals, Equity Reits also have their financial source through selling properties. Usually, these are listed on the stock exchange platforms. Moreover, they can be held publicly and privately.
These Reits invest in mortgages. Also known as mReits, are listed on the stock exchanges. Here, the investor buys the listed share(s) either through mutual funds or exchange-traded funds.
Companies associated with Mortgage Reits make their money through the interest earned on the loans. These can be held publicly and privately. The strategies to invest through mReits are manifold. Investing in high-value mortgage stocks is one such method. Next is an investment in residential and commercial properties and acquiring mortgages from them. Lastly, investing in poor mortgage shares is another option.
In A Nut Shell
Both equity and mortgage REITs are good investment options. Though, Equity Reits are safer and suit well for investors who do not wish to involve in any risks. Mortgage Reits on the other hand pay out high dividends to their investors in comparison with Equity Reits. This type of stock suits investors who are willing to take risks well. Lastly, both payout at least 90% of the incomes earned to their investors. Therefore, depending on your risk capabilities you should make an investment choice.