Lal-Mohal Case Study

Advantages to Investing in Real Estate Investment Trusts

Choice

 REITs provide a lot of choice to individual investors. There are various types of trusts which are catering to the needs of diverse investors. There are some Real Estate Investment Trusts (REITs) which invest exclusively in equity. This means that they buy the properties outright and therefore gain from the cash flows and capital appreciation that these properties provide in the long term. Their returns however are variable and are subject to the vagaries of the market.
On the other hand, Real Estate Investment Trusts (REITs) also offer a debt based investment opportunity. Such funds loan out to real estate developers. These developers then pay a fixed return on the loans which is passed on the investors of the fund. Therefore, Real Estate Investment Trusts have opportunities for risky as well as risk averse investors. By buying a combination of debt and equity based REITs one can create any risk-reward portfolio which is to their liking!

Predictability

Real Estate Investment Trusts provide a lot of predictability compared to other investments. The underlying investment made by REITs is in real estate. Real estate as an asset class has a very predictable rate of appreciation as well as rates at which rentals grow. Therefore, the cash flows from such a fund can be predicted with a high degree of accuracy and certainty.

Most Real Estate Investment Trusts (REITs) in the United States confirm to analyst projections of their revenues and expenses year after year. This has given analysts the confidence that they can predict the cash flows with a high degree of confidence.

If the records for the past few years are considered, Real Estate Investment Trusts (REITs) have consistently outperformed the stock markets and they have done so with a high degree of certainty. Less volatility and higher returns makes REITs a favorite!