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You’ve probably heard the saying that you never lose when you invest in property. While property can be a solid investment, traditional real estate investing can also be a headache. It’s a longer-term commitment that depends on a fluctuating real estate market and can produce illiquid investments. However, a real estate investment trust (REIT) offers a hands-off way to benefit from real estate by investing in property that is highly liquid. Here is Benzinga’s list of the best REIT stocks.
Quick Look at the Best REIT Stocks:
- Vornado Realty Trust
- Annaly Capital Management Inc
- Realty Income
- SL Green
- American Tower
Contents
Overview: REIT Stocks
REITs are companies that own and operate real estate or real estate debt. REITs are publically traded on the stock exchange. These companies buy real estate or real estate assets using combined investments from investors. Most REITs focus on a particular property type, but some hold multiple types of properties in their investment portfolios.
A REIT buys and develops real estate with the intent to lease property space and collect income. REIT companies are required by law to pay at least 90% of their taxable income for shareholders via dividends. REIT shareholders can earn a steady income from their investments but are required to pay taxes on that income.
There are 4 types of REITs:
- Equity REITs are the most common type of REIT investment. Equity REITs own or operate income-producing real estate, are publicly traded and generate revenue from rental incomes and typically invest in retail, residential, industrial or resort properties.
- Mortgage REITs (mREITs) provide financing for real estate by lending money to real estate buyers or acquiring mortgages. mREITs are publicly traded and generate income from the interest earned on mortgage loans.
- Public, nonlisted REITs (PNLRs) are registered with the U.S. Securities and Exchange Commission (SEC) but are not traded on major securities exchanges like equity REITs or mREITs. PNLRs work similarly to equity REITs and generate funds from rental incomes. However, PNLRs face redemption limitations that can affect their liquidity. Generally, liquidity options are limited to share repurchase programs or secondary marketplace transactions.
- Private REITs are real estate funds or companies exempt from SEC registration. They don’t trade shares on the national stock exchange and can only be sold by brokers to institutional investors. Share redemptions vary by company and can be limited.
Best Online Brokers for REIT Stock
You can invest in REITs individually, through an exchange-traded fund (ETF) or a mutual fund.
Interactive Brokers is a comprehensive trading platform that gives you access to a massive range of securities at affordable prices. You can buy assets from all around the world from the comfort of your home or office with access to over 150 global markets. Options, futures, forex and fund trading are also available, and most traders won’t pay a commission on any purchase or sale.
IBKR is geared primarily toward experienced traders and investors but now with the availability of free trades with IBKR Lite, casual traders can also acclimate to IBKR’s offerings.
- Access to international markets
- Active traders
- Detailed mobile app that makes trading simple
- Wide range of available account types and tradeable assets
- IB SmartRouting provides significant price improvement vs. industry
- Fractional trading allows investing regardless of share price
- Industry’s lowest margin rates
- Earn more by lending your fuly-paid shares
- Beginner investors might prefer a broker that offers a bit more hand-holding and educational resources
80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Plus500 is an online CFD broker focusing on contracts for difference (CFDs). CFDs are similar to binary options in the U.S. where traders take all-or-nothing speculation on the prices of certain securities like indices, commodities or currencies. While not legal to trade in the U.S., CFDs are legal in many jurisdictions across the globe and Plus500 offers a wide array of tradable markets using these instruments.
Plus500 doesn’t charge commission and only profits off the spread, which is the difference between the buy and sell price of a specific security. But Plus500 is not a broker for beginners — the education materials are sparse and CFDs are risky derivatives capable of sapping out all of an investor’s capital. Only trade these instruments if you understand how they operate and the risks involved with buying them.
The Plus500 CFD platform is for CFDs. The Plus500 Futures platform offers futures for U.S. customers, and Plus500 Invest offers stock trading.
- Traders looking for a smooth mobile experience
- Great mobile app
- Low spreads and commissions
- Unlimited demo account
- Only derivatives are available
- Not open to U.S. residents
Public is the only investing platform that lets you trade stocks, ETFs, crypto, bonds, options and alternative assets—like fine art and collectibles—all in one place. Public also provides access to custom company metrics, live shows about the markets, and insights from a community of millions of investors, creators, and analysts.
Today, Public provides more ways to create a diversified portfolio than nearly any other online broker. Members can engage in sophisticated investing strategies and access a wealth of investing insights—from company-specific analysis to live audio shows and town hall-style Q&As. In addition, Public offers a premium membership tier with unique company KPIs, detailed performance metrics, and institutional-grade research.
- Stock and ETF investors
- Crypto investors
- Investors looking to diversify with alternative assets or bonds and options
- Commission-free stock and ETF trading
- Fractional share investing
- Advanced data, tools, and insights with Public Premium
- You can’t transfer crypto to another wallet
- No mutual funds or precious metals
- At this time, only offers individual brokerage accounts and not IRAs
Robinhood is a popular trading platform known for its commission-free trades and user-friendly mobile app. Ideal for novice investors, Robinhood makes it easy to buy and sell stocks, ETFs and cryptocurrencies. The platform offers a straightforward, no-frills experience, making it accessible for users new to investing. With features like fractional shares and a sleek interface, Robinhood lowers the barriers to entry for investing, allowing users to start with just a few dollars. It lacks the advanced tools and research options that more experienced investors might seek. Overall, Robinhood is a great choice for beginners seeking a simple way to invest.
- Beginners looking for simplicity
- Mobile-first investors
- Commission-free trades
- User-friendly mobile app
- Instant double
- Cash management
- Access to cryptocurrencies
- Limited research tools
- No mutual funds available
- Basic customer support options
TradeZero is an online broker and free stock trading platform that provides everything you need to successfully share and trade, including round-the-clock customer support. TradeZero provides four different trading state-of-the-art software programs with its services, a locator for sourcing shares for shorting, commission-free trades, and real-time streaming, to name a few of the features promoted on their website. The software is a unique and (potentially) affordable option for anyone interested in stock trading.
- Traders seeking high transparency and mobility in a stock trading program
- Those attracted to commission-free trades
- Those seeking a free version of a high-quality trading program
- 24/7 live customer support
- Uses ZeroWeb technology, a powerful level 2 online platform with direct market access
- Mobile app allows users to access stocks and trade in real-time while on the go
- Enforces Pattern Day Trading restrictions (accounts need to maintain a daily equity balance of at least $25k)
- Mobile app could offer more features
Features to Look For in REIT Stocks
REITs are a way to add real estate into your investment portfolio without becoming a landlord or having to invest large sums of money in a property yourself. When deciding what REIT to invest in, keep an eye out for these key features.
1. Funds From Operations (FFO)
Since REITs invest in real estate, all of a REIT’s assets are depreciable. However, unlike traditional businesses, depreciation doesn’t cost REITs anything — in fact, just the opposite. The value of real estate tends to go up over time.
FFO refers to a REIT’s cash flow from operations and is calculated by adding depreciation and amortization to earnings then subtracting gains on sales. By adding depreciation expenses, a FFO provides a clearer picture of how much money a REIT makes. Many investors view FFO as the most important REIT-specific metric to understand before investing in a REIT.
2. Free Cash Flow (FCF)
FCF refers to the cash left over after a company accounts for its cash outflows to support operations and pay capital expenditures. With FCF, companies can pay dividends, debts and interest to investors among other things.
FCF measures profitability by excluding noncash expenses and including changes in working capital. By including these changes, FCF can help investors determine whether a company is able to pay its expected dividends or interest.
3. Net Asset Value (NAV)
Real estate values are not always easy to determine, presenting a big challenge to REIT investors. Instead of relying on book value or earnings per share (EPS) to determine unit value, many REITs focus instead on net asset value (NAV).
NAV refers to the estimated market value of a REIT’s total assets minus the value of its liabilities. When NAV is divided by the number of common shares, it can be a useful reference point for determining a company’s valuation and share price.
Slow and Steady
Investing in a REIT as part of a long-term investment strategy can enhance your investment portfolio’s stability and earnings. When choosing a REIT, make sure you research the company to determine what percentage of its assets are invested in real estate or real estate holdings. A solid REIT holds a range of diverse assets in its portfolio in order to protect itself against downturns in the real estate market and provide slow but steady growth in the long term.
Frequently Asked Questions
What does REIT stand for?
The post Best REIT Stocks Right Now by Christina Vatansever appeared first on Benzinga. Visit Benzinga to get more great content like this.
