Real estate is something I only started investing in recently. And that's a shame, because I know a lot of people who have done quite well for themselves by putting money into real estate from a fairly young age.
Of course, I can't go back in time and change my investing strategy. But if I could somehow start from scratch with a giant pile of money -- say, $20,000 -- I'd eagerly become a real estate investor in a heartbeat.
That doesn't mean I'd go out and buy physical real estate, though. Instead, I'd take a simpler approach that could make me very wealthy without having to put in nearly as much time or effort.
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A great way to invest in real estate
I have several friends who own rental properties and make a fair amount of money from them. But those friends also put in many hours each month maintaining those homes and dealing with tenant issues. They also sink a lot of money into repairs.
Buying physical real estate wouldn't be a great investing choice for me, simply because I don't have the time to dedicate to managing a rental property. And so if I were to start investing in real estate from scratch, I'd immediately look at REITs, or real estate investment trusts.
REITs are companies that own and manage different portfolios of properties. Within the realm of REITs, there are specific sectors you can invest in. Industrial REITs, for example, maintain warehouses and fulfillment centers. Healthcare REITs, on the other hand, consist of properties like hospitals and urgent care centers.
What I really like about REITs is that they allow you to make money without having to do much work other than some initial research and follow-up. You definitely want to look at a given REIT's finances and see what its cash flow looks like, what percentage of its properties are leased, and what plans it has to expand -- just to name a few metrics. And you'll then want to keep tabs on your REITs once you add them to your portfolio to make sure their performance is up to par.
But there's a huge difference between doing that and actually having to oversee a property. And so for that reason alone, REITs win in my book.
But it's not just laziness that makes REITs my preferred real estate investment choice. REITs are also required to pay at least 90% of their taxable income to shareholders as dividends. As such, they commonly pay higher dividends than your average stock.
Now I've long been a believer in investing in dividend stocks -- not because I want the money from those dividends to buy things with, but because I like the idea of reinvesting dividends for added growth. And REITs certainly lend to that.
A really solid choice
Even if you've been investing for years, it's not too late to branch out into the world of real estate. And if owning a rental property is outside your comfort zone (or it's just plain not something you want to do), it certainly pays to look at REITs.
