{"id":328506,"date":"2025-12-25T08:49:06","date_gmt":"2025-12-25T13:49:06","guid":{"rendered":"https:\/\/www.etrafficlane.com\/60dollarmiracle\/pros-and-cons-of-reits-should-i-invest"},"modified":"2025-12-25T08:49:12","modified_gmt":"2025-12-25T13:49:12","slug":"pros-and-cons-of-reits-should-i-invest","status":"publish","type":"post","link":"https:\/\/www.etrafficlane.com\/60dollarmiracle\/pros-and-cons-of-reits-should-i-invest","title":{"rendered":"Execs and Cons of REITs \u2013 Ought to I Make investments?"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<h2><img loading=\"lazy\" decoding=\"async\" title=\"Application Software\" class=\"aligncenter size-full wp-image-112513\" src=\"https:\/\/www.savingadvice.com\/wp-content\/uploads\/2023\/05\/real-estate-reit-pros-and-cons.jpg\" alt=\"real-estate-reit-pros-and-cons\" width=\"801\" height=\"489\" \/><\/h2>\n<h2><span id=\"Are_REITs_a_Good_Investment_A_Brief_Lesson_in_Diversification\" data-dcy-id=\"0.28836462572994437\">Are REITs a Good Investment? A Brief Lesson in Diversification<\/span><\/h2>\n<p data-dcy-id=\"0.855957750711583\">Long before Modern Portfolio Theory proved the benefit of diversification, \u201cDon\u2019t put all your eggs in one basket\u201d was practiced. Intuitively, it makes sense to spread your income and investing risk around. The rationale behind diversification and\u00a0<a href=\"https:\/\/barbarafriedbergpersonalfinance.com\/asset-allocation\/\" target=\"_blank\" rel=\"noreferrer noopener\">asset allocation<\/a>\u00a0is that when one asset goes down in value, another may go up. Spread your investments and risk around and you\u2019ll decrease the volatility of your returns.<\/p>\n<p data-dcy-id=\"0.3753019520156957\">For example, invest only in one stock market mutual fund and when the stock market falls 20% in a bad year, so do your investment returns. Add a bond mutual fund to the stock fund and even if the returns on the stock fund fall, the bond fund\u2019s returns might go up 15% and make your total portfolio value more stable.\u00a0Add real estate to the mix and the added diversification, and lower correlation with the other asset classes increases returns and lowers overall risk of your portfolio.<\/p>\n<p>By adding various asset classes to your\u00a0investment portfolio your portfolio risk declines\u00a0and return improves.<\/p>\n<h2><span id=\"What_is_a_Real_Estate_Investment_Trust_REIT\">What is a Real Estate Investment Trust (REIT)?<\/span><\/h2>\n<blockquote class=\"wp-block-quote\">\n<p><em>\u201d REITs earn a share of the income produced through real estate investment \u2013 without actually having to go out and buy or finance property.\u201d<\/em><\/p>\n<p><cite><em>REIT.com<\/em><\/cite><\/p>\n<\/blockquote>\n<p>So, you want to add real estate to your investments but don\u2019t understand the whole real estate investment company idea.<\/p>\n<p>According to REIT.com, a real estate investment trust is comprised of many companies, similar to a mutual fund, that own or finance income-producing real estate. There are two general varieties, Equity REITs and Mortgage REITs.<\/p>\n<p>Equity REITs own real property, while mortgage REITs are actually debt instruments and own various types of real estate mortgages and loans. Drilling down, there are many distinct types of REITS from office, industrial, lodging, self-storage, infrastructure, mortgages, diversified and more. Due to the vast choices in real estate, investors can choose to invest in a specific type of REIT, like a mortgage REIT, or go with a broadly diversified fund with many types of real estate holdings.<\/p>\n<p>I\u2019ve invested in both\u00a0<a href=\"https:\/\/barbarafriedbergpersonalfinance.com\/how-why-build-fixer-upper-part-2\/\" target=\"_blank\" rel=\"noreferrer noopener\">bricks and mortar real estate\u00a0<\/a>and REITs and I\u2019m a fan of REITs.<\/p>\n<p>REIT dividends provide steady cash flow and allow you to sleep at night. You\u2019re not going to get a tenant calling at 2 am with a broken pipe. When investing in the Vanguard Real Estate ETF (VNQ) fund you won\u2019t worry when a tenant moves out before the lease is up.<\/p>\n<p>Investing in a real estate fund is as easy as reviewing a list of available funds and clicking \u201cbuy\u201d at your online discount brokerage account.\u00a0But before you rush out to invest, check out the advantages and disadvantages of REIT investing.<\/p>\n<h2><span id=\"Types_of_REITs\">Types of REITs<\/span><\/h2>\n<p>The benefits of investing in REITs include income, capital gains, and capturing assets in a niche corner of the market.<\/p>\n<p>As an investor, I\u2019ve bought broadly diversified real estate investment trusts in the U.S. and abroad. You might prefer to invest your money in specific types of property like storage or office buildings.<\/p>\n<p>The types of real estate trusts might spark an interest in shares in an area you believe is poised to grow.<\/p>\n<p data-dcy-id=\"0.879741899045607\">Most investors will buy and sell equity and mortgage REITs. Equity REITs are more common than mortgage REITs. Although there are also privately traded and non-listed REITs, typically for wealthier investors.<\/p>\n<p data-dcy-id=\"0.38016130579723506\">Here is a list of the types of REIT investments you might consider from various sectors:<\/p>\n<ul>\n<li data-dcy-id=\"0.31182374471471586\">Office<\/li>\n<li data-dcy-id=\"0.26467227143556893\">Industrial<\/li>\n<li>Retail<\/li>\n<li data-dcy-id=\"0.23610013503253358\">Lodging<\/li>\n<li data-dcy-id=\"0.9265425887449215\">Residential<\/li>\n<li>Timberland<\/li>\n<li data-dcy-id=\"0.5769437863238365\">Healthcare<\/li>\n<li data-dcy-id=\"0.7955571064575058\">Self Storage<\/li>\n<li data-dcy-id=\"0.5521223346240196\">Infrastructure<\/li>\n<li data-dcy-id=\"0.8046254566971707\">Data Centers<\/li>\n<li>Mortgage<\/li>\n<li>Diversified<\/li>\n<\/ul>\n<h2><span id=\"REIT_Index_Mutual_Funds_and_Exchange_Traded_Funds_ETF\">REIT Index Mutual Funds and Exchange Traded Funds (ETF)<\/span><\/h2>\n<p>The best REITs for long term investors can be found on the\u00a0<a href=\"https:\/\/www.reit.com\/investing\/reit-directory\/company\" target=\"_blank\" rel=\"noreferrer noopener\">NAREIT<\/a>\u00a0website. You\u2019ll find nearly 200 different types of real estate investment trusts. This is also a great site to learn.<\/p>\n<p>Here is a list of several broadly diversified national and international REIT mutual funds and ETFs. These are some of the best long-term REITs to gain exposure to a wide swath of the real property market.<\/p>\n<ul>\n<li>VGSIX-Vanguard U.S. REIT Index Mutual Fund<\/li>\n<li>VNQ-Vanguard U.S. REIT Index ETF<\/li>\n<li>RWR-SPDR Dow Jones Index REIT ETF<\/li>\n<li>VNQI-Vanguard Global ex-U.S. Global Real Estate ETF<\/li>\n<li>FGL-iShares Developed Real Estate (ex-U.S.) ETF International Fund.<\/li>\n<li>RWX- SPDR Dow Jones International Real Estate\u00a0exchange-traded fund.<\/li>\n<\/ul>\n<h3 id=\"h-reit-example-vnqi\"><span id=\"REIT_Example_8211_VNQI\">REIT Example \u2013 VNQI<\/span><\/h3>\n<p>The Vanguard Global ex-U.S. Real Estate ETF (VNQI) is a path to becoming an international real estate mogul. Well, almost. This REIT is a handy way to own real estate stocks in more than 30 countries.<\/p>\n<p>You can count on Vanguard REIT funds to offer low-cost diversification.<\/p>\n<p>With a 7.49% yield, passive investors seeking cash flow might benefit from the fund, with a rock-bottom 0.12% expense ratio. Recent lackluster performance may turn around as developing nations and other international real estate growth rebounds.<\/p>\n<p>VNQ companies are distributed across the globe:<\/p>\n<p>20.4% Emerging Markets<\/p>\n<p>26.20% Europe<\/p>\n<p>47.50% Pacific<\/p>\n<p data-dcy-id=\"0.12450600256082911\">1.0% Middle East<\/p>\n<p>2.20% North America<\/p>\n<p data-dcy-id=\"0.8343293624623758\">2.70% Other<\/p>\n<h2 data-dcy-id=\"0.5182729000642252\"><span id=\"Pros_of_REIT_Investing\">Pros of REIT Investing<\/span><\/h2>\n<ol>\n<li data-dcy-id=\"0.14124858839537957\">REITs provide an income stream as they are required by law to pay out at least 90% of their income in dividends. Although there are some REITS that circumvent the\u00a0<a href=\"https:\/\/www.dividend.com\/how-to-invest\/in-spite-of-90-rule-why-do-some-reits-have-poor-payout-ratios\/\" target=\"_blank\" rel=\"noreferrer noopener\">90% rule<\/a>.<\/li>\n<li data-dcy-id=\"0.16652021521090266\">REITs have a long track record of growing their dividends.<\/li>\n<li data-dcy-id=\"0.05934341983111846\">The properties owned by REIT companies can appreciate in value over time, thus growing your initial investment.<\/li>\n<li data-dcy-id=\"0.2470634077442846\">REITs are professionally managed, to get the greatest returns on the individual properties.<\/li>\n<li data-dcy-id=\"0.496122039416945\">REITs provide diversification to a stock and bond portfolio and can curb portfolio losses should stock prices fall.<\/li>\n<li data-dcy-id=\"0.8850770754108903\">REITs are easy to buy and sell through your online investment account. My spouse even invests in a REIT fund in his 401(k).<\/li>\n<\/ol>\n<p><em><strong data-dcy-id=\"0.7121092285255448\">Compare\u00a0<a href=\"https:\/\/www.roboadvisorpros.com\/m1-finance-vs-robinhood\/\" target=\"_blank\" rel=\"noreferrer noopener\">Robinhood vs M1 Finance<\/a>. Find out which platform is best for your money.<\/strong><\/em><\/p>\n<h2 data-dcy-id=\"0.7160863250918479\"><span id=\"Cons_of_REIT_Investing\">Cons of REIT Investing<\/span><\/h2>\n<ol>\n<li data-dcy-id=\"0.8511750801021187\">REIT investment risk might depend upon the type of properties you\u2019re invested in. For example, mortgage REIT returns could suffer if interest rates are high and fewer investors are taking out mortgages.<\/li>\n<li data-dcy-id=\"0.3114650403366137\">As interest rates rise, financing real estate will become more expensive and borrowers will pay higher interest costs. This can put a damper on broadly diversified REIT investment returns.<\/li>\n<li>REIT fund values go up and down, like most securities. Imagine that you buy a Vanguard REIT fund like VNQ for $76.00 per share and a 3.0% yield. If the price falls, your investment will be worth less. You\u2019ll still receive your dividend payment, but the total value of your investment will decline.<\/li>\n<li>Although you typically earn a juicy dividend on your real estate assets, you\u2019ll have to pay taxes on those dividends, typically at a higher rate than the 15% levied on most dividends. This is because most REIT income is considered ordinary income, although this varies by REIT.<\/li>\n<\/ol>\n<p><strong><em>Bonus: <\/em><\/strong><a href=\"https:\/\/barbarafriedbergpersonalfinance.com\/pay-off-mortgage-or-invest-market\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong><em data-dcy-id=\"0.8625750777743006\">Should I pay off my mortgage or invest in the stock market?<\/em><\/strong><\/a><\/p>\n<h2 id=\"h-faq\" data-dcy-id=\"0.9017638217891346\"><span id=\"FAQ\">FAQ<\/span><\/h2>\n<div class=\"schema-faq wp-block-yoast-faq-block\" data-dcy-id=\"0.8720152936948662\">\n<div id=\"faq-question-1603916447119\" class=\"schema-faq-section\" data-dcy-id=\"0.8597065376180608\">\n<p><strong class=\"schema-faq-question\">How do REITs make money?<\/strong><\/p>\n<p class=\"schema-faq-answer\" data-dcy-id=\"0.35368874254450877\">REITs make money from rent they receive. They also make money when they sell real property for a profit.<\/p>\n<\/div>\n<div id=\"faq-question-1603916580252\" class=\"schema-faq-section\" data-dcy-id=\"0.19243024035396172\">\n<p><strong class=\"schema-faq-question\">Can you lose money in a REIT?<\/strong><\/p>\n<p class=\"schema-faq-answer\" data-dcy-id=\"0.7620731186458398\">Yes. Like most investments, if the share price goes down, and you sell your investment, then you would lose money. When investing, it\u2019s best to own various asset types, so that when one falls in price, others will remain steady or increase.<\/p>\n<\/div>\n<div id=\"faq-question-1603916708438\" class=\"schema-faq-section\" data-dcy-id=\"0.7150149668439343\">\n<p><strong class=\"schema-faq-question\">How is REIT income taxed?<\/strong><\/p>\n<p class=\"schema-faq-answer\" data-dcy-id=\"0.06327907935921351\">\u00a0REITs send IRS Form 1099-DIV to their shareholders. The form breaks down the dividend distributions into ordinary income, capital gains, and return of capital. Investors pay taxes according to their tax rate for each category of income.<\/p>\n<\/div>\n<div id=\"faq-question-1603917782960\" class=\"schema-faq-section\" data-dcy-id=\"0.29243606600012484\">\n<p><strong class=\"schema-faq-question\" data-dcy-id=\"0.8720875276164737\">How much do REITs pay out in monthly dividends?<\/strong><\/p>\n<p class=\"schema-faq-answer\" data-dcy-id=\"0.5539821498987234\">REITs pay out roughly 90% of their taxable earnings. The actual REIT payout ratio depends upon how those earnings are calculated.<\/p>\n<\/div>\n<\/div>\n<h2><span id=\"Are_REITs_a_Good_Investment_The_Takeaway\">Are REITs a Good Investment? The Takeaway<\/span><\/h2>\n<p>You diversify your investments because you don\u2019t know which financial assets are going to shine and which ones will lag. Even if REITs aren\u2019t the best stocks in the next year or two, over the long haul, they\u2019ve proven to be a solid way to invest in real estate and grow your financial net worth.<\/p>\n<p>My family investment portfolio includes REIT shares and has for decades. Like any investment, REITs have pros and cons. Although, there\u2019s really little reason not to invest in REITs in a diversified portfolio.<\/p>\n<h3 id=\"h-related\"><span id=\"Related\">Related<\/span><\/h3>\n<ul>\n<li data-dcy-id=\"0.01971513871137831\"><a href=\"https:\/\/barbarafriedbergpersonalfinance.com\/diversyfund-review-real-estate-crowdfunding\/\">Diversyfund Review<\/a>\u00a0\u2013 Real Estate Crowd Funding for Everyday Investors<\/li>\n<li><a href=\"https:\/\/barbarafriedbergpersonalfinance.com\/why-how-to-diversify-with-real-estate-reit\/\">REITs and Crowdfunding<\/a>\u00a0\u2013 How to Invest<\/li>\n<li><a href=\"https:\/\/barbarafriedbergpersonalfinance.com\/why-how-to-diversify-with-real-estate-reit\/\">EquityMultiple Review<\/a>\u00a0\u2013 Is This Crowdfunding Platform for You?<\/li>\n<li data-dcy-id=\"0.08356208641102003\"><a href=\"https:\/\/barbarafriedbergpersonalfinance.com\/fundrise-vs-reits\/\">Fundrise vs REITs<\/a>\u00a0\u2013 Which is Best?<\/li>\n<\/ul>\n<div class=\"wp-block-aweber-signupform-block-aweber-shortcode\">\n<div class=\"AW-Form-1842343280\">\n<div>\n<div id=\"af-form-1842343280\" class=\"af-form\"><\/div>\n<\/div>\n<\/div>\n<\/div>\n<p data-dcy-id=\"0.32493809695820497\"><em data-dcy-id=\"0.5672362057546481\">Disclosure; I own VNQ, VNQI and have an account at M1 Finance.<\/em><\/p>\n<p data-dcy-id=\"0.2548594111726954\"><em data-dcy-id=\"0.23925877987737\">Disclosure: Please note that this article may contain affiliate links which means that \u2013 at zero cost to you \u2013 I might earn a commission if you sign up or buy through the\u00a0affiliate link. That said, I never recommend anything I don\u2019t personally believe is valuable.<\/em><\/p>\n<div class=\"saboxplugin-wrap\">\n<div class=\"saboxplugin-tab\">\n<div class=\"saboxplugin-gravatar\"><img loading=\"lazy\" decoding=\"async\" title=\"Barbara Friedberg Barbara A. Friedberg\" src=\"https:\/\/www.savingadvice.com\/wp-content\/uploads\/2022\/12\/best-portrait-friedberg.jpg\" width=\"100\" height=\"100\" alt=\"Barbara Friedberg Barbara A. Friedberg\" ><\/div>\n<div class=\"saboxplugin-authorname\"><a href=\"https:\/\/www.savingadvice.com\/articles\/author\/barbara-friedberg\/\" class=\"vcard author\" rel=\"author\"><span class=\"fn\">Barbara Friedberg<\/span><\/a><\/div>\n<div class=\"saboxplugin-desc\">\n<div>\n<div>Barbara A. Friedberg, MBA, MS, former portfolio manager, is committed to investment and money education across multiple platforms. Her work has been featured on US News and World Report, Yahoo!Finance, Investors.com and more. Friedberg owns owns\u00a0 barbaraFriedbergPersonalFinance.com which is dedicated to improving investment knowledge and wealth.\u00a0 Friedberg consults for a select group of fintech companies and writes for many popular online media outlets. Her books &#8220;<a href=\"https:\/\/amzn.to\/3YtPnqN\" target=\"_blank\" rel=\"noopener\">How to Get Rich; Without Winning the Lottery: A Guide to Money &amp; Wealth Building<\/a>&#8221; and &#8220;<a href=\"https:\/\/amzn.to\/3RBHFIU\" target=\"_blank\" rel=\"noopener\">Invest and Beat the Pros-Create and Manage a Successful Investment Portfolio: Best Research Supported Index Fund Strategy<\/a>&#8221; are available on Amazon.<\/div>\n<\/div>\n<\/div>\n<div class=\"saboxplugin-web \"><a href=\"https:\/\/barbarafriedbergpersonalfinance.com\/\" target=\"_self\">barbarafriedbergpersonalfinance.com\/<\/a><\/div>\n<div class=\"clearfix\"><\/div>\n<\/div>\n<\/div>\n<p><br \/>\n<br \/><a href=\"https:\/\/www.savingadvice.com\/articles\/2025\/12\/24\/10112512_pros-and-cons-of-reits-should-i-invest.html\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Are REITs a Good Investment? A Brief Lesson in Diversification Long before Modern Portfolio Theory proved the benefit of diversification, \u201cDon\u2019t put all your eggs [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4557],"tags":[338,5774,5772,5769,5775,5767,408,5768,5773,5771,5770],"class_list":["post-328506","post","type-post","status-publish","format-standard","hentry","category-marketing","tag-application-software","tag-barbara-friedberg-barbara-a-friedberg","tag-internal-revenue-service","tag-monetary-web-value","tag-on-line-funding-account","tag-stable-solution","tag-supervisor","tag-vanguard-reit","tag-wealth-building","tag-widespread-on-line-media-retailers","tag-yahoo"],"_links":{"self":[{"href":"https:\/\/www.etrafficlane.com\/60dollarmiracle\/wp-json\/wp\/v2\/posts\/328506","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.etrafficlane.com\/60dollarmiracle\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.etrafficlane.com\/60dollarmiracle\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.etrafficlane.com\/60dollarmiracle\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.etrafficlane.com\/60dollarmiracle\/wp-json\/wp\/v2\/comments?post=328506"}],"version-history":[{"count":2,"href":"https:\/\/www.etrafficlane.com\/60dollarmiracle\/wp-json\/wp\/v2\/posts\/328506\/revisions"}],"predecessor-version":[{"id":328508,"href":"https:\/\/www.etrafficlane.com\/60dollarmiracle\/wp-json\/wp\/v2\/posts\/328506\/revisions\/328508"}],"wp:attachment":[{"href":"https:\/\/www.etrafficlane.com\/60dollarmiracle\/wp-json\/wp\/v2\/media?parent=328506"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.etrafficlane.com\/60dollarmiracle\/wp-json\/wp\/v2\/categories?post=328506"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.etrafficlane.com\/60dollarmiracle\/wp-json\/wp\/v2\/tags?post=328506"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}