What makes REITs attractive for investors?

Hi anon,

Plenty of factors! I won't elaborate on them too much but here are some:

• High liquidity compared to property

• Generally higher yield compared to actual property

• Low cost of entry, compared to actual property

• It's leveraged, but the REIT is the one taking on the leverage, not yourself (unless you leverage to buy more). Thus, returns are magnified

• Good diversification compared to owning a single property on your own

• Dividend payouts are not subjected to income tax

• No headaches when trying to find a tenant - it's not your job to do so

You'll notice that I am comparing them to physical property; the value of a REIT is dominated by the value of the property they own. Buying a REIT in essence makes you a propety owner.

There are downsides too, as is the case with any investment, so although what I listed about sounds all nice and rosy, you have to be aware that there are pros and cons associated with all investments and thus some investments might not be suitable for you.​​​

Reits are mandated to pay out 90% of the taxable income which makes it very attractive for people who want stable income. It is also diversified across many industries as well.