Dabbling in REITs? 10 Sectors to Look At

Investing in real estate is a great way to grow wealth. But you don't have to load up on income properties or start flipping houses to get in on the action. An easier, less risky option may be to load up on REITs, or real estate investment trusts. REITs are companies that make money by operating different properties, and here are a few specific REIT sectors worth considering right now.

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The COVID-19 pandemic has spurred an uptick in e-commerce. That's created a strong need for warehousing space, which makes industrial REITs worth looking at. Industrial REITs manage warehouses and distribution centers, and they're a good bet at a time when digital sales are booming.

ALSO READ: 3 Best Industrial REITs to Buy Now

As the world goes increasingly digital, businesses are apt to rely even more heavily on data centers in the coming years. That's why we can expect the need for data centers to increase.

Data center REITs, as you might guess, manage facilities that store data. These centers can be costly to operate due to the need for enhanced security, but they're worth investing in as e-commerce and remote work continue to dominate.

Healthcare REITs are companies that operate medical buildings, hospitals, skilled nursing facilities, and urgent care centers. What makes these REITs worth investing in is that they're pretty much recession-proof. Even during economic downturns, consumers will always need medical care.

ALSO READ: This $18 Billion Healthcare REIT Deal Could Be a Sign of Things to Come

Residential REITs manage apartment complexes and other spaces that tenants rent. Because homeownership has gotten too expensive, thanks to soaring property values, more people are turning to rentals for their housing needs. That makes residential REITs a potentially strong buy.

As the name implies, infrastructure REITs manage infrastructure such as telecommunication towers. Think of these REITs as that essential cog in the machine of life. Without the proper infrastructure, businesses can't operate, and cities can't function.

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Retails REITs operate malls and shopping centers. While these REITs took a beating during the pandemic as stores shuttered permanently, they've been staging a comeback. And now that more people are on board with in-person shopping, we could see strong performance from retail REITs in the coming years.

ALSO READ: Are Retail REITs a Buy? 2021 Data Says So

Hospitality REITs own hotels and resort properties. Like retail REITs, these REITs suffered during the pandemic when travel came to a halt. But now, leisure travel is picking up, and business travel could soon follow suit, making it a good time to invest in the hospitality space.

Self-storage REITs manage self-storage facilities they rent to individuals and businesses alike. These days, a lot of people's living situations are in flux in the aftermath of the pandemic, and that's created a strong need for self-storage.

And as more people become permanent remote-work converts, they're likely to need storage space to carve out room in their homes to do their jobs.

ALSO READ: This Self-Storage REIT Is Delivering Explosive Growth

Cold-storage REITs are a type of industrial REIT that manages climate-controlled storage facilities. During the pandemic, there was a notable uptick in online grocery orders as health fears kept shoppers out of supermarkets. That's spurred the need for extra cold-storage space.

Meanwhile, consumers are likely to continue ordering groceries online due to the convenience, which means cold-storage demand should remain high.

Diversified REITs manage a mixed real estate portfolio. These REITs might manage a mix of movie theaters, malls, and office properties, for example. Just as it's a good idea to diversify a stock portfolio, so is it wise to adopt a similar approach to REITs, and diversified REITs fit the bill in that regard.

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As is the case with all investments, there are risks involved in buying REITs. The value of REIT shares could fall with market conditions, or general economic conditions could hurt some REITs' abilities to generate revenue.

But all told, REITs are a great way to dabble in real estate without owning physical property. And it's worth learning more about them if you're hoping to branch out in your portfolio.

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