Are REITs a good investment

The best REITs real estate stocks at a glance

In this post from the series The Best Stocks, we want to give you the best REITs real estate stocks introduce and explain what exactly a REIT actually is (you can find many details and special features of REITs in the special article about REITs).

Thanks to this special legal form, every investor can now build up a global real estate portfolio even with little money. This is worthwhile, among other things, because properties in sought-after locations have delivered strong performance over the years. Furthermore, REITs map the property's asset class and thus contribute to the diversification of the overall portfolio.

For this reason, we are now looking at which REITs a dividend-oriented investor can deposit and what makes a REIT so special.

Disclaimer investment advice

REITs real estate stocks: the most important points in brief

the essentials in brief

  • A REIT is a special form of public company and does not have to pay corporate income tax if 90 percent of profits are distributed.
  • REITs mostly rent out real estate, but there are also a large number of special REITs.
  • The demand for living space and real estate in good locations is very high.
  • Interesting REITs real estate stocks include Realty Income (WKN: 899744), Welltower (WKN: A1409D), Deutsche Konsum REIT (WKN: A14KRD) or American Tower (WKN: A1JRLA).
  • Risks are often high leverage for REITs and possibly rising interest rates.

Definition: what are REITs real estate stocks?

The abbreviation REIT stands for Real Estate Investment Trusts, which is called in German Real estate investment companies could translate. As a rule, REITs are stock corporations that have received this additional status from the tax office.

The REIT status exempts the stock corporation from corporation tax if the company pays out at least 90 percent of its profits in the form of a dividend. Depending on the country-specific legal situation, there may be additional requirements. REITs real estate shares are therefore particularly popular with income-oriented investors and are also often used by retirees in the Anglo-Saxon countries.

Opportunities: Why should you invest in REITs real estate stocks?

There are essentially three reasons for investing in REITs real estate stocks. On the one hand, you can with REITs indirectly and diversified Invest in real estate without the hassle of viewing, drawing up a notary contract, investing a lot of capital and so on.

So you can benefit from the high demand for real estate. In addition, the bottom line is that you pay less taxes, as you benefit from the corporate income tax exemption and only the distributed income is taxed with capital gains tax.

Last but not least, REITs real estate shares are very well suited for shareholders who want to buy because of their high regular payouts and predictable cash flows passive income want to build. There are even some REITs that pay their dividends on a monthly basis, making it almost equal to a salary.

Investment: The best REITs real estate stocks to invest in

Most REITs come from the Anglo-Saxon countries, but they are also traded on German stock exchanges and Germany now has a handful of REIT shares. We'll give you five now exciting REITs real estate stocks in front:

  1. Realty Income
  2. Welltower
  3. American campus communities
  4. German consumer REIT AG
  5. American Tower

1. Realty Income

Realty Income (WKN: 899744 / ISIN: US7561091049) is one of the best-known REIT companies and also likes to call itself “The Monthly Dividend Company”. This shows an exciting quality, because whoever owns this company actually gets it dividend every month.

Realty Income earns its living renting retail properties in prime locations, mainly in the United States. The three largest tenants are the drugstore chain Walgreens, the supermarket 7-Eleven and the postal service FedEx, which together account for just 15% of sales according to Wikipedia.

2. Well tower

Welltower (WKN: A1409D / ISIN: US95040Q1040) primarily invests in Senior housing and assisted living real estate. They also rent out various medical practices and hospitals. With an investment in Welltower you not only participate in the already strong real estate demand, but also through the megatrend Demographic change. There are more and more elderly people who also often live longer, which means that the demand for assisted living and health facilities should also be secured in the future.

3. American campus communities

The REIT American Campus Communities (WKN: A0B7TP / ISIN: US0248351001) developed and manages student dormitories in the USA. Similar to healthcare properties, apartments are also for students less sensitive to economic trends and ensure a steady flow of payments for shareholders.

The demand for affordable housing for students is already very high and is likely to continue to grow as society becomes more academized. It is therefore an advantage that American Campus Communities not only rent out, but also build and develop dormitories themselves.

4. Deutsche Konsum REIT AG

With Deutsche Konsum REIT AG (WKN: A14KRD / ISIN: DE000A14KRD3), a German REIT also makes it into our top list. The company is comparable to Realty Income, as they only rent to retailers in the local supply sector such as Edeka, Netto, Penny or ALDI.

Food supply retailers are less exposed to competition from the US Online trade as for example affected by Amazon. It is rather unlikely that these tenants will not pay and thus Deutsche Konsum REIT AG is probably one of them safest payer of dividends.

5. American Tower

As a last title we would like to introduce you to American Tower (WKN: A1JRLA / ISIN: US03027X1000), this is a special REIT. The company does not rent out traditional residential or office properties, but is a Lessor of radio masts. American Tower now owns 170,000 transmitters in 17 countries.

Due to the increasing use of mobile data in smartphones, the company has already recorded high growth. This should continue for a long time, because with the new one 5G technology significantly more transmission masts are required due to a shorter range.

What are the risks of REITs real estate shares?

For the acquisition of real estate, a large part of the purchase price is traditionally financed through loans. This leads to REITs often high leverage ratios have on the balance sheet. REITs that are very sensitive to the economy can quickly come under pressure. Then there is the high Dependence on the interest rate, because you save a lot of money when interest rates are low, but when interest rates rise, refinancing will become more and more expensive.

Specialized REITs such as prison REITs are also dependent on political decisions.

Conclusion: passive income with REITs real estate stocks

Anyone who wants to build up their wealth in order to receive a passive income from it will actually not get around REITs real estate shares. With cyclical REITs you can do so regularly predictable dividends and participate in the real estate industry.

Frequently asked questions

Which REITs real estate stocks are the best?

REITs should if possible regardless of the economy and have predictable cash flows. The properties are owned by Deutsche Konsum REIT AG or American Tower, for example.

How good are REITs stocks for building wealth?

Due to their high payout, REITs lose a large part of the compound interest effect, but they are very well suited for asset accumulation if the goal is to build a passive income with stocks or if you want to profit from the real estate industry.

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