HomeCoursesLivestreamOn-DemandResourcesHall of FameInvestor ForumsStoreTraining Schedule Guest: Sign In / Register

News Feed

REITs: Picking the One for You

By: Elite Legacy Education, December 13, 2016

REITs: Picking the One for You

In the past, we’ve talked about investing in real estate through real estate investment trusts (REITs) to avoid buying an actual property. Although REITs avoid all of the maintenance needs associated with owning a property, you still need to be able to pick the right one. This is easier said than done, especially with the variety of REITs available to investors. Luckily, we’re going to break it down and guide you in the right direction towards picking a REIT that suits you.


The first step is to determine which kind of REIT you would prefer.

As we’ve mentioned in a previous article, there are three main kinds of REITs – equity, mortgage and hybrid REITs. Just to refresh your memory, equity REITs invest in physical properties, while mortgage REITs place claims on the proceeds from mortgages. Let’s start with the different types of equity REITs out there. These funds can invest in many different sectors, including some of the following:

  • Healthcare: These REITs focus their investments in properties associated with the healthcare industry. This may include real estate, such as hospitals, retirement homes or any other medical-related facilities.
  • Office: These REITs invest in commercial property that is used for office buildings.
  • Residential: Residential REITs invest in rental properties, such as apartments, condominiums and other housing.
  • Retail: These REITs invest in commercial property used as storefronts for retail businesses, as well as shopping malls.
  • Industrial: Industrial REITs focus on real estate used to support the supply chains of businesses, such as warehouses, distribution centers, manufacturing plants and more.
  • Hotel: REITs focusing on the hotel sector tend to invest in a variety of different types of hotels and other hospitality accommodations.


On the other hand, we have mortgage REITs which do not actually invest in physical properties. Instead, these types of REITs may engage in trading mortgage-backed securities on secondary markets, or even issue mortgages of their own. So now that we’ve presented a variety of REITs available to you, you’re probably wondering how to determine which ones are better than others.


What to consider in the evaluation of different REITs.

Without getting too technical and caught up in valuation formulas, there are some immediate attributes you should consider:

  1. Track record of financial performance. Specifically, you will want to do some research into the fund’s ability to provide high dividend payouts and capital appreciation on its properties.
  2. Consider the management team. Take note of the career lengths and reputation of the members on the management team. Especially with real estate, it serves to have experienced members on your team.
  3. Quality over quantity. Focus on those REITs that invest in quality properties with quality tenants. This will help to reduce the number of future capital-consuming expenses that will cut away at the profits of the REIT.
  4. Ensure liquidity. This typically implies REITs that are traded on a stock exchange, since you can more easily divest or invest based on personal preference. Liquidity is one of the differentiating factors between investing in actual real estate and a REIT.
  5. Account for industry-specific factors. Be sure to consider relevant factors of those sectors that the REIT invests in which could affect the profitability of these investments. For example, since equity REITs generate income from rental payments, consider factors that could affect occupancy rates.
  6. Valuation techniques. For those of you who want to look at the numbers, you can apply two different methods to help you evaluate the REIT. The first option is the Funds from Operation (FFO) method, which considers whether the REIT is generating enough cash to cover its dividend obligations. The second method is to apply the Net Asset Value (NVA) formula which presents the overall value of the asset. We will explore these in further detail later on in a subsequent article.


A final option if you still don’t know which one is the one for you.

If in the end, if you just don’t feel comfortable picking a single REIT to invest in, that’s perfectly fine too. There are still other options for you to benefit from. Specifically, you can invest in index funds, mutual funds or exchange traded funds (ETFs) that invest in REITs. That way, all you do is invest in the fund and they take care of which REITs are most worthy of your capital. An added bonus is that you benefit from the diversification across many REITs.

All it comes down to is finding the investment option that’s best for you.

Today's market is filled with many opportunities for the savvy investor. Our Rich Dad Education trainers will introduce you to proven strategies that can help you launch your career as a successful real estate investor. Our Rich Dad Education instructors will also discuss ways you can develop a "Rich Dad Mindset".

Don’t miss out on all of the ways Rich Dad Education can help you reach your goals in life!

Learn more about Real Estate Investing in our upcoming free interactive webinar! Register Here

Want the live experience? Attend an upcoming free workshop coming to your area! Register Here

What our students are saying: There is a great benefit to getting educated. This is just the tip of the iceberg. The education will provide fruits in many different areas. Ray B. Burns, WY

Browse through our Rich Dad Education reviews by clicking above!

Founded in 1992, Elite Legacy Education is a recognized global leader in quality financial education.
Legacy Education Alliance, Inc. is a leading provider of educational training seminars, conferences and services.
Rich Dad Education offers real estate & stock training based on Robert Kiyosaki's book Rich Dad Poor Dad.

© LEA Brands, Inc. All Rights Reserved.

The Elite Legacy Education word mark and logos are owned by LEA Brands, Inc. and are used with permission.

Elite Legacy Education is a trade name of Elite Legacy Education, Inc., a Florida Corporation.

The educational training program provided hereunder is not designed or intended to qualify students for employment. Our curriculum is avocational in nature and is intended for the purpose of the accumulation of wealth by, and the personal enrichment, development and enjoyment of, our students.

Privacy Policy | Terms | Cookies