There are several ways to invest in the real estate market without buying a physical property. Investors, for example, can purchase shares of a real estate investment trust (REIT), which hold a portfolio of income-producing properties. They can also buy shares of a homebuilder, real estate developer, listing agency, or home-improvement company.
With several opportunities in each category, it's likely hard for beginning real estate investors to know which ones are the best to buy. Here's a look at three of the best ways to get started on investing in real estate through the stock market right now.
|Real estate stock||Type of Business||Market capitalization||Dividend yield|
|Brookfield Property REIT (NASDAQ: BPR)||Diversified REIT||$1.2 billion||7.2%|
|Howard Hughes Corp. (NYSE: HHC)||Real estate developer||$5.5 billion||0.0%|
|Zillow Group (NASDAQ: Z) (NASDAQ: ZG)||Real estate website||$9.5 billion||0.0%|
Brookfield Property REIT: Become an instant real estate mogul
Brookfield Property REIT is a subsidiary of global real estate partnership Brookfield Property Partners (NASDAQ: BPY). It enables investors to own a stake of Brookfield's vast real estate portfolio in REIT form.
The company invests about 85% of its capital into premier office and retail properties in the top markets around the world. Brookfield leases space in this real estate to high-quality tenants, enabling it to generate steady cash flow from the rent it collects to support its high-yielding dividend. Brookfield Property also invests about 15% of its capital into real estate-focused private equity funds managed by its parent Brookfield Asset Management (NYSE: BAM). These investments span the entire real estate sector, including residential, hospitality, and industrial. Because of that, Brookfield offers investors immediate access to a diversified real estate portfolio, making them an instant mogul.
In addition to holding cash flowing real estate, Brookfield Property acquires and develops new properties. The idea is that the cash flow generated from its growing real estate portfolio will allow it to increase its dividend by 5% to 8% per year. That makes it an ideal option for investors who want to collect income from real estate without the hassles of becoming a landlord.
Howard Hughes Corporation: Unlocking the value of land
Howard Hughes Corporation (NYSE: HHC) is a real estate company focused on developing master-planned communities (MPCs). The company sells tracts of land in its MPCs to homebuilders. It then uses the proceeds to build amenities like retail, office, and hospitality properties that support the communities. Those developments provide the company with a recurring income stream while also boosting the value of its remaining land holdings, enabling it to sell future acreage parcels to homebuilders and other developers at higher prices.
Howard Hughes recently refocused its operations around its core MPCs in Texas, Nevada, and Hawaii. As part of that process, the company aims to sell $2 billion of noncore properties, giving it cash to develop new amenities in its core MPCs, repurchase stock, and make opportunistic acquisitions. It recently made one such deal, buying a portfolio of office properties in The Woodlands, Texas, from oil giant Occidental Petroleum (NYSE: OXY). That deal will not only further solidify its leading office portfolio in that MPC but also help offset some of the lost income from noncore asset sales.
An investment in Howard Hughes is one in a company with a proven track record of creating value from its land. That makes it an ideal stock for investors looking for the upside that can come from real estate development.
Zillow Group: The future of real estate
Zillow Group owns a portfolio of online real estate brands that help make the buying, selling, financing, and renting of real estate a more seamless experience. The company's namesake brand offers a fully-integrated product suite that includes listings and financing as well as an iBuyer program that lets users buy and sell homes directly through the company.
Zillow's business model is evolving from monetizing the consumers who flocked to their sites to view real estate listings to providing an integrated platform that uses advanced technology enabling them to seamlessly buy, sell, rent, and borrow. This evolution is helping drive fast-paced revenue growth, with it more than doubling year over year during the third quarter. The biggest driver was its home segment, which includes its Zillow Offers business that buys homes from sellers and then resells them. While that business is currently losing money as it aggressively expands into new markets, it expects its returns to improve significantly as it grows its scale. That’s helped the company offset the slower growth of its legacy Internet, Media & Technology businesses as it adjusts its operating models -- such as flex pricing within its Premier Agent segment -- to fit within its Zillow 2.0 strategy of revolutionizing the home transaction experience.
Zillow Group is an innovator in the real estate market, making it a great stock for investors who want to participate in the sector's online growth via emerging trends like iBuying.
The stock market has something for every type of real estate investor
While many investors want to own a piece of the real estate market in their portfolio, few likely want to deal with the hassles that come with direct property ownership. That's why the stock market can be a great alternative way to invest in the sector. Buying shares of a great real estate company like Brookfield Property, Howard Hughes, or Zillow Group gives investors the opportunity to passively participate in the sector's upside.
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