There are a lot of ways to make money in the stock market today outside of traditional individual stock purchases. And REITs are easily one of the most popular options for generating passive income (almost) on demand.
But can you really get rich investing in REITs? Turns out you can – especially if you are smart, savvy, strategic, and get a little bit of luck from the market, too. Truth be told, REITs work a lot like traditional stock dividends – with a couple of wrinkles – and the potential for profit here is fantastic.
Below we jump into the nuts and bolts of how to get rich investing in REITs.
Let’s do this!
Can You Get Rich Investing in REITs?
You bet you can!
Investing in real estate has always been the “golden road to success” when it comes to wealth generation, and REITs basically open the doors to real estate investment without having to pony up a mountain of money to purchase properties outright.
With traditional real estate investments, you need (at the very least) 20% cash down on multi-hundred thousand dollar purchases just to get a chance to secure the properties that will generate you income years down the line.
On top of that, you have to worry about monthly expenses that owning a property – and especially owning multiple properties – involves. You have to worry about taxes. You have to worry about the real estate market.
It’s a lot of headache and a lot of hassle. But the potential for extreme wealth is a big allure, and most people are willing to put up with a little frustration in the hopes of transforming their financial future forever.
With REITs, though, you get a lot of the benefits that traditional real estate investing offers without a lot of the headache, without a lot of the hassle, and without a lot of the same risk factors.
The potential for extreme wealth generation definitely exists with REITs. Make no mistake about that.
But the real reason that these kinds of investments are so popular is because they minimize and mitigate the risk that you usually take on investing in real estate individually.
REIT Investing Pros and Cons
On the plus side of things, there’s a lot to fall in love with when it comes to REIT investing as a wealth generation vehicle.
Diversification
For one thing, you have an opportunity to invest in a diversified portfolio of properties when you buy into REITs. Something that’s really tough to pull off without a ton of money otherwise.
You might be able to pull together the cash for a single down payment on a single property as an individual investor. But you’re probably going to have a tough time adding dozens (or even hundreds) of properties to your portfolio anytime soon.
REITs open up a portfolio of dozens if not hundreds of properties to anyone and everyone buying into them.
Dividend Payments
Next, REITs also offer dividend payments similar to the dividend structure for traditional stocks. Legally, REITs are required to pay out at least – AT LEAST – 90% of the income generated by the properties they hold in the form of dividends.
That means you as an REIT investor are going to see a pretty decent chunk of change on a routine basis in the form of REIT dividends. It’s not hard to pile up a tremendous amount of passive income when you go down this road.
Combine all of that with the tangibility of REITs (you’re investing in real properties, not necessarily business potential), the lack of corporate tax – that means your profits are higher – and the overall liquidity of this asset class and you’re looking at a real wealth generation winner here.
On the flip side of things, though, there are some drawbacks to REIT investing you’ll want to be aware of.
Taxes
For one, you’re going to have to pony up the cash for taxes on the dividends that you have been paid.
That’s kind of a bummer.
Sensitive To Interest Rate Fluctuations
Secondly, REITs are (at least a little bit) sensitive to interest rate fluctuations. Rising interest rates can tank the value of REITs. These investments are tied pretty closely to the treasury yield. So when you see the yield at the treasury rise you’re probably going to see REIT value fall.
Long Term Investment
Lastly, this is very much a long-term investment strategy.
That’s not explicitly a negative (it’s actually a pretty powerful and a fit when you’re looking for long-term wealth generation) – but a lot of people are looking for something that can help them drum up money straight out of the gate.
It might take you a little while to see real wealth from your REITs. Unload these investments to early and you might have to pony up cash for a pretty stiff penalty.
What Makes REITs Such a Powerful Wealth Builder?
There are a lot of things that make REITs attractive as a wealth builder, but the biggest thing has to be the way that REITs open up the real estate investment world to people that otherwise would have been blocked from climbing aboard.
As we made mention of earlier, the number one asset class on the planet is (and always has been) valuable real estate.
We can make more of almost anything with relative ease – except for more valuable real estate.
The demand (and the value) for real estate is always going to be there, for as long as people are going to want to purchase physical property.
If you’re able to jump into REIT investing you stand to make a tremendous amount of money, not just through the passive dividend payout income these unlock but through the actual value of the REIT shares over time as well.
Consider Investing With Fundrise
Fundrise is an online investment platform that allows you to invest in real estate projects across the United States. With Fundrise, you can access a diversified portfolio of high-quality properties without having to go through the hassle and expense of traditional real estate investing.
The Fundrise team has a deep understanding of how real estate markets work, and they use this knowledge to carefully select properties that have the potential to generate strong returns. In addition, they use cutting-edge technology to make the investing process simple and efficient.
Click this link in order to get $25 towards your Fundrise portfolio. Keep in mind this is an affiliate link and I will earn money from you using the link as well!
Closing Thoughts
Yes, you can definitely make a lot of money – you can get rich! – investing in REITs.
You’ll have to be strategic and you’ll have to be deliberate about the REITs that you invest in. And you might even have to get (a little) lucky) to really transform your financial future and enjoy the kind of wealth that few people ever unlock.
But the potential is here.
REITs are a game changing investment that you don’t want to sleep on.
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