Why eREITs are a better way to invest in real estate

Published Tuesday, Sep. 14, 2021, 10:45 am

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Real Estate Investment Trusts (eREITs) have fast emerged as the most attractive method to invest in real estate. These organizations have business models similar to mutual funds with a key difference. Instead of investing money in stocks traded in the open market, REITs purchase and manage real estate. You’ll purchase units in your chosen company and earn income without the need to own and supervise the investment. Should you check out the Fundrise review, you’ll learn that returns can be in the form of quarterly payments and capital earnings when the company liquidates the property.

Why small investors typically don’t target real estate

Investing in real estate is the perfect option to grow your money through rental income and capital appreciation. Since you’re investing in a tangible product, the investment is secure, and you always have the option of refinancing to take advantage of dropping mortgage interest rates. However, direct purchases typically require a sizeable down payment in addition to sweat equity with time and effort. Most importantly, you’ll need to gather the expertise and know-how to identify suitable properties you should purchase. If you’re just looking for some secure avenue to invest money and earn a passive income, eREITs such as Fundrise could be the next best option.

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You get access to a diverse portfolio of real estate

Conventional real estate investment gives you access to a property category, such as residential or commercial, which is subject to value variations according to market conditions. eREITs allow you to invest in a diverse portfolio of real estate with the option to invest in properties that make sense to you. For instance, you could put your money into single-family homes or multiple-family apartment complexes. If you think that the particular business area is likely to appreciate quickly in the coming years, that’s where you can invest your spare funds. As for denominations, REITs accept as low as $500 in investment. Now that’s a great way to dip your toes in the pool.

REITs have a high return potential

The law requires eREITs to divert a minimum of 90% of their taxable income to shareholders. As a result, you can expect returns of 7.4% to 12.4% per year, depending on the portfolio you’ve purchased and the particular year. Dividends of 5% or higher are a common occurrence. Possibly, the best plus of investing in a REIT is liquidity. You can change your portfolio at any time by transferring funds out of it and reinvesting elsewhere, much like a stock. However, you might want to expect to invest in the REIT for a minimum of five years since this option is designed as a long-term investment.

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If you’ve been looking to take advantage of real estate as a lucrative investment option, eREITs are an excellent channel. You can invest sums as low as $500 and earn passive income without managing the property or detailed know-how about the workings of the industry.

Story by Alex Simon


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