Real Estate Investment Trusts (REITs) are a popular way for investors to gain exposure to the real estate market without owning physical property. Here are some common types of REITs and their risk profiles:
If you do want to own physical property, then a good real estate underwriting model is essential and I've got a lot of them (commercial and residential) as well as all sorts of joint venture waterfall schedules.
Here are some various types of REITs you can invest in...
- Equity REITs: Listed on the stock exchange. These are the most common type of REITs and invest in physical properties such as office buildings, apartments, shopping centers, and hotels. They generate revenue from rent, and their risk profile is generally moderate to high, depending on the types of properties they invest in and the overall state of the real estate market.
- Residential REITs: These invest in residential properties such as apartments, multi-family, townhouses, mobile home parks, short-term rentals, and single-family homes. The risk profile of these REITs is generally considered to be moderate, as demand for rental housing tends to be relatively stable even during economic downturns.
- Commercial REITs: These invest in commercial properties such as self-storage, office buildings, retail spaces, and warehouses. The risk profile of commercial REITs can vary depending on the specific sector and location of the properties they invest in. For example, office REITs may face higher risk in the event of economic downturns or changes in the demand for office space.
- Healthcare REITs: These invest in healthcare facilities such as hospitals, nursing homes, assisted living facilities and medical office buildings. The risk profile of healthcare REITs is generally considered to be moderate to low, as demand for healthcare services tends to be relatively stable regardless of economic conditions.
- Industrial REITs: These invest in industrial properties such as factories and distribution centers. The risk profile of industrial REITs can vary depending on the specific sector and location of the properties they invest in. For example, industrial REITs that invest in logistics facilities may be less risky than those that invest in manufacturing facilities.
- Retail REITs: These invest in retail properties such as shopping malls, strip malls, and standalone stores. The risk profile of retail REITs can vary depending on the specific sector and location of the properties they invest in. For example, retail REITs that invest in prime locations and have strong tenants may be less risky than those that invest in less desirable locations or have weaker tenants.
- Mortgage REITs: Listed on the stock exchange. These types invest in mortgages and mortgage-backed securities. They earn revenue by collecting interest on the mortgages they hold, and their risk profile is generally higher than that of equity REITs. Mortgage REITs are exposed to interest rate risk, credit risk, and prepayment risk.
- Hybrid REITs: Listed on the stock exchange. These REITs invest in both physical properties and mortgages. They have a mix of the risks associated with equity and mortgage REITs, and their risk profile is generally moderate.
- Public non-traded REITs: These are not listed on a stock exchange and are sold to investors through broker-dealers. They are generally less liquid than other types of REITs and carry higher fees. Their risk profile can vary depending on the specific investments made by the REIT.
- Private REITs: These REITs are not publicly traded and are sold to accredited investors. They are generally less liquid than other types of REITs and carry higher fees. Their risk profile can vary depending on the specific investments made by the REIT.
