There are several best real estate investments, often called REITs to invest in that pay monthly passive income. REITs often pay a higher dividend than the average dividend stocks or ETFs. It comes down to your risk tolerance, investment capital, and goals.
Real estate investment trust companies are a great way to invest in real estate without actually having to buy the property yourself. By investing in a REIT, you can get exposure to a variety of different types of real estate without having to worry about being a landlord or dealing with repairs yourself. Investors should consider allocating a portion of their portfolio to REITs in order to diversify their holdings and earn greater returns.
1. What is a Real Estate Investment Trust
A real estate investment trust (REIT) is a company that owns, operates, or finances real estate and allows investors to purchase some shares. The majority of REITs are a type of security that trades on major exchanges.
There are many different types of REITs, but they all share certain characteristics. First, REITs must distribute at least 90 percent of their taxable income to shareholders in the form of dividends. This makes them attractive to income-seeking investors.
Second, REITs must have a minimum of 100 shareholders and no more than 50 percent can be affiliated with the company. This structure helps ensure that REITs are widely held and not controlled by a small group of insiders.
Third, at least 75 percent of a REIT’s assets must be invested in real estate, cash, or government securities.
2. Different types of Real Estate Investment Trust
The main types of REITs are equity REITs, mortgage REITs, and hybrid REITs.
Equity REITs own and operate properties and use the rental income to pay dividends to shareholders. Mortgage REITs invest in mortgages and other real estate loans and use the interest payments to pay dividends to shareholders. Hybrid REITs combine features of both equity and mortgage REITs.
Equity REIT Investments
Pros:
-Diversification potential
-High-income potential
-Low correlation with other asset classes
-Potential for high total returns
-Professional management
Cons:
-High fees
-Illiquidity
-Leverage can magnify losses
-Macroeconomic factors can affect performance
-Preferred shares may be more volatile than common share
Mortgage REIT Investment
PROS:
-Diversification: Mortgage REITs offer investors exposure to a unique asset class that is not well-represented in traditional stock and bond portfolios.
-Income: Mortgage REITs tend to have high dividend yields, providing a source of income that is not always available from other investments.
-Potential for Capital Appreciation: While the primary focus of a mortgage REIT is to generate income, these companies also have the potential to generate capital gains as well.
-Leverage: Mortgage REITs use leverage to generate higher returns, which can lead to higher losses during periods of market turmoil.
-High Expenses: Mortgage REITs tend to have high expense ratios, which can eat into investment returns over time.
CONS:
-Interest Rate Risk: Mortgage REITs are sensitive to changes in interest rates, as rising rates will lead to higher borrowing costs and lower profits.
Hybrid REIT Investments
Pros:
-A hybrid REIT is a type of real estate investment trust that owns and operates a portfolio of properties and also makes loans to other property owners.
-The advantage of investing in a hybrid REIT is that it provides exposure to both the income generated by the properties it owns as well as the interest payments on the loans it makes.
-This can provide investors with more stability and less volatility than pure equity or debt REITs.
-Another benefit is that hybrid REITs often have lower costs of capital than pure equity REITs, making them more attractive to investors.
-Lastly, hybrid REITs tend to be less risky and therefore provide a higher potential return than debt REITs.
Cons:
1. Hybrid REIT investments can be complex and difficult to understand.
2. They can be expensive, with high fees and costs associated with them.
3. They can be risky, with a potential for loss of capital.
4. They may be illiquid, meaning it can be difficult to sell your investment.
5. They may be subject to tax consequences.
3. Real Estate Investment Trust Factors
There are many different REIT companies to choose from, so how do you know which ones are the best?
The best REIT companies are those that have a strong presence in the retail market. These companies have a proven track record of success and are well-positioned to continue to grow in the future.
Here are a few factors to consider when determining the best REIT companies:
Diversification: A good REIT company will have a diversified portfolio, meaning they own a variety of properties in different locations and sectors. This helps to mitigate risk and ensure that the company will still perform well even if one particular market declines.
Stability: Another critical factor to look for in a REIT company is stability. This means that the company has a history of consistent dividend payments and has been operating for several years. While newer companies may offer higher returns, they also come with more risk.
Size: The size of the REIT company can also be a factor to consider. Consider the size and scope of the company. Some REITs are large, national companies with a broad portfolio of properties. Others are smaller, regional players with a more focused portfolio.
Quality of the company’s properties: The best REITs own high-quality properties that are well-maintained and generate strong rental income.
Management team: REITs are led by experienced professionals who have a deep understanding of the retail market and know how to create value for shareholders.
There are many great REIT companies out there. Here are a few of the best REIT companies to invest in right now.
4. Real Estate Investment Trust Companies
Realty Income Corporation
Realty Income Corporation (NYSE: O) is a real estate investment trust (REIT) that focuses on the acquisition, ownership, and leasing of commercial properties in the United States.
The company operates in the office, retail, industrial, and self-storage sectors. Office properties represented 21.4% of the company’s total portfolio as of December 31, 2019, followed by retail (18.2%), industrial (17.9%), and self-storage (10.5%).
Realty Income is one of the largest and most diversified REITs in the United States with a portfolio of over 6,500 properties across 49 states.
Simon Property Group, Inc.
Simon Property Group is an American real estate company that owns, develops, and manages retail real estate properties, which it holds mostly through long-term leases. The company is headquartered in Indianapolis, Indiana, and employs more than 5,000 people across the U.S.
Simon Property Group was founded in 1960 by Melvin Simon and his brother Herbert. The duo started with one shopping center in Indiana and grew its portfolio through aggressive acquisitions and development. By the end of the decade, they had become one of the largest shopping center developers in the country.
VICI Properties
VICI Properties is an independent real estate investment trust that owns and operates twenty-six gaming facilities across the United States. The company’s portfolio includes nineteen casinos, seven horse racing tracks, and one golf course. VICI Properties is the largest owner of casino gaming properties in the United States.
The company operates in two segments: real estate investment trusts (REIT) and gaming and hospitality. The REIT segment owns, acquires, and redevelops real estate assets leased to gaming operators including casinos, hotels, restaurants, retail outlets, bowling centers, golf courses, and other entertainment venues.
Digital Realty Trust, Inc
Digital Realty Trust, Inc. is a REIT that owns, acquires, develops, and operates data centers. The company has a portfolio of 151 data centers across the globe. The company’s data centers house critical IT infrastructure for some of the world’s leading companies including banks, cloud providers, media and entertainment companies, and government agencies.
Digital Realty Trust is one of the largest owners and operators of data centers in the world with a portfolio of 151 data centers across the globe. The company’s data centers house critical IT infrastructure for some of the world’s leading companies including banks, cloud providers, media and entertainment companies, and government agencies.
Digital Realty Trust is a publicly traded real estate investment trust (REIT) focused on owning, acquiring, developing, and operating data center properties.
W. P. Carey Inc.
W. P. Carey Inc., a publicly traded real estate company, is engaged in the ownership, management, and development of commercial real estate properties across the United States and Europe. The company’s portfolio consists of approximately 1,200 properties, including warehouses, distribution centers, office buildings, and retail properties.
Carey is organized as a real estate investment trust (REIT), with a diversified portfolio of properties leased to corporate and government tenants on a long-term basis. Carey has been consistently ranked as one of the top REITs by investment analysts for its strong performance and dividend yield.
Iron Mountain
Iron Mountain Incorporated is a profile of the sector. It is the largest provider of storage and information management services in North America, with more than 1,400 locations in the United States and Canada.
Founded in 1951, Iron Mountain stores and protects billions of items, including business documents, medical data, and cultural and historical artifacts. The company’s services include records management, data protection, and document imaging.
Iron Mountain serves customers in a variety of industries, including healthcare, government, financial services, legal, and media, and entertainment. The company has been recognized for its environmental sustainability initiatives, including its use of renewable energy sources.
Healthpeak Properties, Inc
Healthpeak Properties, Inc. is a real estate investment trust that invests in healthcare-related properties. The company was founded in 1992 and is headquartered in Denver, Colorado. Healthpeak owns and operates a portfolio of over 150 healthcare-related properties across the United States. The company’s portfolio includes hospitals, senior housing facilities, medical office buildings, and other healthcare-related assets.
Healthpeak has a diversified portfolio of properties across the healthcare continuum that provides exposure to various growth drivers in the sector. The company’s hospital portfolio consists of acute care facilities, behavioral health hospitals, and rehabilitation hospitals. Healthpeak’s senior housing portfolio includes independent living communities, assisted living communities, and skilled nursing facilities.
The company’s medical office building portfolio consists of Class A buildings located in major metropolitan markets across the United States.
Gaming and Leisure Properties, Inc
Gaming and Leisure Properties, Inc. is a real estate investment trust which owns, finances, and leases gaming and related entertainment properties in the United States. Gaming and Leisure Properties, Inc. operates as a real estate investment trust (REIT). The Company, through its subsidiaries, owns or finances gaming and related entertainment properties in the United States. The Company’s segments include real estate operations and corporate operations.
Boston Properties, Inc.
Boston Properties, Inc. is a publicly traded real estate investment trust that owns, develops, and manages commercial real estate properties in the United States.
The company’s properties are primarily located in Boston, New York City, San Francisco, Washington D.C., and London. Its portfolio includes office buildings, hotels, retail space, and residential units. The company also has a minority ownership stake in several publicly traded companies including Hilton Worldwide and Vornado Realty Trust.
STORE Capital Corporation
STORE Capital Corporation is a real estate investment trust that focuses on the financing and leasing of net-leased properties in the United States. The company’s primary focus is on middle-market companies that operate in the service industries.
STORE Capital Corporation has a diversified customer base with no single tenant accounting for more than 4.0% of its rental revenue. The company’s largest tenants include PetSmart, Inc., Aaron’s, Inc., and Hibbett Sports, Inc.
Annaly Capital Management, Inc
Annaly Capital Management, Inc. is a mortgage real estate investment trust (REIT) that invests in and finances a portfolio of mortgage assets. The company’s primary business is investing in residential and commercial mortgage-backed securities (MBS).
Annaly Capital Management has a diversified portfolio of MBS with investments in both agency and non-agency securities. The company’s portfolio consists of fixed-rate, adjustable-rate, hybrid, and other types of MBS. Annaly Capital Management also has investments in commercial mortgage loans, real estate securities, and other assets.
National Retail Properties, Inc.
National Retail Properties, Inc. is a real estate investment trust that invests in high-quality retail properties subject to long-term, net leases. The company’s stock is traded on the New York Stock Exchange under the ticker symbol NNN. National Retail Properties is a member of the S&P 500 and the Russell 1000 indices. The company has paid dividends to shareholders for 34 consecutive years and has increased its dividend payout for each of the last 25 years.
Omega Healthcare Investors, Inc
Omega Healthcare Investors, Inc. (NYSE: OHI) is a leading real estate investment trust (REIT) that specializes in financing and leasing skilled nursing and assisted living facilities. The company’s portfolio consists of over 1,400 properties across the United States, the United Kingdom, and Canada. Omega has a long-standing history of providing quality care to its tenants and their patients.
The company’s stock has outperformed the REIT sector over the past five years, returning an average of 17% per year. Omega’s strong operating performance is driven by its diversified portfolio, conservative financial policies, and experienced management team.
Investors seeking exposure to the healthcare sector should consider Omega Healthcare Investors as a high-quality option.
Medical Properties Trust, Inc.
Medical Properties Trust, Inc. (NYSE: MPW) is a self-advised real estate investment trust (REIT) focused on investing in and owning net-leased healthcare facilities across the United States. The company’s portfolio of properties includes acute care hospitals, rehabilitation hospitals, long-term acute care hospitals, and other medical facilities.
Starwood Property Trust, Inc
Starwood Property Trust, Inc. is a leading commercial mortgage real estate investment trust with a strong track record of delivering value to shareholders. The company is focused on originating, acquiring, financing, and managing commercial mortgage loans, commercial mortgage-backed securities, and other commercial real estate-related debt investments.
Starwood Property Trust has a diversified portfolio that includes office, retail, hotel, condominium, and other properties. The company’s strong balance sheet and conservative underwriting standards have allowed it to weather the challenges in the commercial real estate market in recent years.
Looking ahead, Starwood Property Trust is well-positioned to take advantage of the improving conditions in the commercial real estate market. The company’s experienced management team and disciplined investment approach should continue to generate strong returns for shareholders.
Brixmor Property Group Inc
Brixmor Property Group Inc. is a publicly traded real estate investment trust that owns and operates a portfolio of open-air shopping centers in the United States.
Brixmor’s portfolio is primarily composed of grocery-anchored properties, which make up 97% of its total leasable space. Brixmor is one of the largest shopping center owners in the United States and has a significant presence in some of the country’s most populous metropolitan areas.
STAG Industrial, Inc
STAG Industrial, Inc. is a real estate investment trust that owns, operates, and leases industrial properties across the United States. STAG Industrial owns a portfolio of over 170 million square feet of industrial space, making it one of the largest owners and operators of industrial real estate in the country. The company’s properties are leased to tenants in a variety of industries, including manufacturing, distribution, logistics, and e-commerce.
STAG Industrial is one of the leading players in the industrial real estate market. The company has a strong portfolio of properties and is continuing to grow its footprint across the United States. STAG Industrial is a great option for investors looking to gain exposure to the industrial sector.
Spirit Realty Capital, Inc.
Spirit Realty Capital, Inc. is a real estate investment trust that primarily invests in single-tenant net-leased properties across the United States. The company was founded in 2003 and is based in Scottsdale, Arizona. The company’s portfolio is diversified across sectors including retail, healthcare, office, industrial, and self-storage.
The company has a strong focus on single-tenant net-leased properties and has a track record of delivering consistent financial results.
Kilroy Realty Corporation
Kilroy Realty Corporation (KRC) is a real estate investment trust (REIT) that focuses on developing, acquiring, and operating office and mixed-use properties in California and the Pacific Northwest. The company was founded in 1946 and is headquartered in Los Angeles, CA. KRC operates in two segments: Office Properties and Mixed-Use Properties.
The company’s portfolio includes office buildings located in premier business districts such as Downtown Los Angeles, San Francisco’s Financial District, Hollywood Media District, Pasadena’s Playhouse District, and Silicon Beach in Santa Monica. KRC’s mixed-use developments are located near public transportation hubs in Downtown San Diego, Seattle’s South Lake Union neighborhood, and Downtown Portland.
Vornado Realty Trust
Vornado Realty Trust is a real estate investment trust (REIT) that owns, manages, and develops office, retail, and residential properties in the United States. The company was founded in 1959 and is headquartered in New York City.
The company’s portfolio is primarily concentrated in the Washington, D.C., and New York City metropolitan areas.
| Ticker | Company | Industry |
| O | Realty Income Corporation | REIT – Retail |
| SPG | Simon Property Group, Inc. | REIT – Retail |
| VICI | VICI Properties Inc. | REIT – Diversified |
| DLR | Digital Realty Trust, Inc. | REIT – Office |
| WPC | W. P. Carey Inc. | REIT – Diversified |
| IRM | Iron Mountain Incorporated | REIT – Specialty |
| PEAK | Healthpeak Properties, Inc. | REIT – Healthcare Facilities |
| GLPI | Gaming and Leisure Properties, Inc. | REIT – Specialty |
| BXP | Boston Properties, Inc. | REIT – Office |
| STOR | STORE Capital Corporation | REIT – Diversified |
| NLY | Annaly Capital Management, Inc. | REIT – Mortgage |
| NNN | National Retail Properties, Inc. | REIT – Retail |
| OHI | Omega Healthcare Investors, Inc. | REIT – Healthcare Facilities |
| MPW | Medical Properties Trust, Inc. | REIT – Healthcare Facilities |
| STWD | Starwood Property Trust, Inc. | REIT – Mortgage |
| BRX | Brixmor Property Group Inc. | REIT – Retail |
| STAG | STAG Industrial, Inc. | REIT – Industrial |
| SRC | Spirit Realty Capital, Inc. | REIT – Diversified |
| KRC | Kilroy Realty Corporation | REIT – Office |
| VNO | Vornado Realty Trust | REIT – Office |
| Ticker | Market Cap | Dividend | ROA | Volume |
| O | 35.83B | 5.17% | 1.40% | 2,909,105 |
| SPG | 31.38B | 7.47% | 6.30% | 1,911,219 |
| VICI | 29.77B | 5.10% | 2.70% | 3,671,564 |
| DLR | 26.18B | 5.47% | 3.60% | 2,382,003 |
| WPC | 14.82B | 5.98% | 3.40% | 776,392 |
| IRM | 13.30B | 5.45% | 2.50% | 894,575 |
| PEAK | 12.33B | 5.42% | 1.50% | 3,073,700 |
| GLPI | 11.94B | 6.05% | 5.20% | 1,953,737 |
| BXP | 11.48B | 5.51% | 2.90% | 953,688 |
| STOR | 8.88B | 5.24% | 3.30% | 3,334,204 |
| NLY | 7.74B | 20.75% | 4.90% | 11,740,502 |
| NNN | 6.95B | 5.65% | 3.80% | 1,074,643 |
| OHI | 6.92B | 9.16% | 4.60% | 1,803,761 |
| MPW | 6.91B | 10.60% | 6.00% | 22,950,320 |
| STWD | 6.01B | 10.14% | 0.90% | 4,376,293 |
| BRX | 5.77B | 5.12% | 3.50% | 1,620,141 |
| STAG | 5.11B | 5.25% | 3.80% | 1,517,714 |
| SRC | 5.03B | 7.36% | 2.80% | 1,017,130 |
| KRC | 4.85B | 5.35% | 1.80% | 550,788 |
| VNO | 4.20B | 10.05% | 0.70% | 2,877,073 |
Key Takeaways about REITs
Some pros of investing in REITs are that they can offer high-income potential and portfolio diversification.
REITs are required to pay out at least 90% of their taxable income to shareholders in the form of dividends, which can make them attractive to investors seeking regular income. Some cons of investing in REITs are that they may be more volatile than other types of investments and can be subject to interest rate risk.
REITs may be less liquid than other investments and can be subject to tax consequences if held for less than a year.
No matter what type of real estate investment trust REIT you’re interested in, it’s important to understand the risks and rewards involved before making any investment.
