Real Estate Investing

How Safe Are Real Estate Investment Trusts

Tirios Team

February 14, 2023
How Safe Are Real Estate Investment Trusts

Table of Contents

1. How Safe Are Real Estate Investment Trusts?

2. Are real estate investment trusts a good investment?

3. What can go wrong with REIT?

4. How do beginners invest in REITs?

5. Are REIT mutual funds a good investment?

6. Does Blackstone own BREIT?

7. What REIT pays the highest dividend?

8. What are the risks of industrial REITs?

9. Conclusion

“He is not a full man who does not own a piece of land.” The quote rightfully emphasizes the importance of owning real estate in your investment portfolio. Risk-averse investors consider real estate as a good investment vehicle due to its characteristics – stable rent-income and long-term value.

There are several strategies for real estate investing – rental properties, flipping houses, REITs, and real estate mutual funds. Reportedly, 150 million Americans live in households invested in REITs. Over the recent years, they have evolved as a popular investment among individual investors, thanks to their steady dividends and the hedge against inflation.

So the question is- are REITs a safe investment? The following blog explains the significance of REITs, their risks, how to invest in them, and a list of REITs.

Are Real Estate Investment Trusts A Good Investment?

To reach the conclusion whether they are a good investment or not, we need to know what real estate investment trusts are. Real Estate Investment Trust (REIT) is an organization that owns and operates different real estate properties to generate income.

So why should one invest in REITs? Well, for starters, REITs pay 90% of their taxable income to shareholders as dividends each year. REITs invest in different real estates property sectors, such as:

  • Offices
  • Apartments
  • Hotels
  • Warehouses
  • Healthcare facilities
  • Retail centers, such as malls
  • Data centers and cell towers

While some REITs specialize in a specific property sector, others diversify their holdings. Reit investing is a popular investment vehicle as it allows "Everyday Americans'' to invest in different property sectors without actually owning them. Hence, they can acquire high yields like other investment opportunities of stocks and mutual funds, saving their time and resources. 

What Can Go Wrong With Reit?

So, why not to invest in REITs? Although REITs are good investment portfolio diversification, they have potential risks. The following are the risks of REIT investing:

  • Liquidity Risk

"Liquidity equals freedom." Liquidity is essential in investment and determines how easily one can buy or sell a security in the secondary market. Public REITs offer investors the freedom to sell shares on the public exchange market; however, the shares are less liquid when compared to stocks and bonds.

There is no secondary market to find prospective buyers and sellers for the property; the only way is through the fund's repurchase offers. 

  • Leverage Risk

"Leverage is a two-edged sword." While leverage can benefit a borrower, it can sometimes lead to one's downfall. When investors use borrowed money to purchase securities, REITs have a leveraged risk. Also, borrowing includes interest payments and processing fees, which reduce the reserve available for shareholders' dividend distribution.

  • Market Risk

Real Estate Investment Trust shares are traded on the public exchange and hence, are susceptible to the ebbs and flows of the financial market. So, investors may earn fewer profits than the base price they bought the shares. Besides, external factors like recession, interest rate changes, and natural disasters can influence the market.

  • Interest Rate 

Increasing interest rates are a downside of publicly traded funds as people prefer safer investments, such as U.S. Treasuries. The U.S. Treasury is a government initiative offering a fixed interest rate.

How Do Beginners Invest In REITs?

REITs operate on a simple model: Leasing space and acquiring rent on real estate space, and the company pays most of the taxable profits as shareholder dividends. How can one begin investing in REIT? 

Here are the basic steps to start REIT investing for beginners:

  1. Open a brokerage account. You could invest with a workplace retirement plan if you own one.

  1. Provide your primary contact details, SSIN, valid ID, income range, occupation, etc. Depending on your broker, you can open an online account or visit the nearest branch to complete the procedure.

  1. Once you open your account, you can research and review various real estate investment trusts online through the educational tools available.

  1. Choose the suitable REIT scheme gauging different criteria that fit your financial needs and investment goals.

  1. However, consider the brokerage fees and fund expense ratio before deciding. Review the investment periodically and evaluate its performance over time. 

Are REIT Mutual Funds A Good Investment?

Real Estate Investments are a great alternative to diversify your investment portfolio. REITs and Real Estate Mutual funds provide easy diversification to access different property sectors. Moreover, REIT is an organization that directly invests in real estate through properties and mortgages.

On the other hand, REIT mutual funds are pooled investments that invest in REITs and real estate stocks through fund managers and experts.

Real Estate Mutual Fund is a good investment for the following reasons:

  • Diversification with limited capital
  • Exposure to a broader diversification as compared to stocks and bonds.

Does Blackstone Own BREIT?

Blackstone Real Estate Investment Trust (BREIT) is Blackstone Group's behemoth venture into private real estate. BREIT Blackstone is one of the most significant non-listed REIT funds raising over $50 billion.

The revolutionary fund primarily invests in stabilized income-generating funds across asset classes in the United States and, to a small extent, in real estate debt investments. 

The primary goal of the BREIT fund is to provide individual investors access to the private real estate market. The lower investment limit of BREIT is $2,500, on which it pays a dividend of 4% to 5%.

What REIT Pays The Highest Dividend?

REITs fall into three types: equity, mortgage, and hybrid REIT. Each category includes three classes – publicly traded, public non-traded, and private REITs. Each category of high yield REITs has unique characteristics and potential risks.

The given list of REITs and dividends gives a brief outline of REIT stocks:

[All data current as of March 10, 2023]

REIT Stocks Short-form Dividend
(over one-year)
Share price
Getty Realty Corp GTY 33.9% $35.73
Gaming and Leisure Properties, Inc. GLPI 28.8% $53.67
VICI Properties VICI 28.8% $34.55
Iron Mountain IRM 26.7% $54.67
Agree Realty Corp. ADC 21.5% $73.71

American Strategic Investment Co., formerly called New York City REIT (NYC REIT), is a popular international REIT that invests in prominent commercial estates. Rather than focusing only on the best REITs for dividends, diversification into REIT mutual funds and real estate ETFs is crucial.

The following table gives an outline of the top-performing REIT mutual funds:

[All data current as of March 10, 2023]

REIT Mutual Funds Short-Form Returns Share Price
Baron Real Estate Institutional BREIX 5.9% 1.05%
Baron Real Estate R6 BREUX 5.9% 1.05%
Baron Real Estate Retail BREFX 5.9% 1.31%
Altegris/AACA Opportunistic Real Estate I RAAIX 5.3% 1.92%
Altegris/AACA Opportunistic Real Estate N RAANX 5.3% 2.17%


The following table gives a list of industrial REITs:

[All data current as of March 1, 2023]

Industrial REITs Short-form Dividend Yield
Prologis PLD 2.82%
Rexford Industrial Realty Inc. REXR 1.90%
Eastgroup Properties EGP 3.06%
Americold Realty Trust COLD 2.99%

What Are The Risks Of Industrial REITs?

Industrial REITs own, manage and lease industrial properties. They primarily buy or build industrial spaces for the manufacturing, production, or distribution of goods. Although these REITs have a hedge over rescission and aid e-commerce growth, they come with their risks. 

The following are the two potential risks of industrial REITs:

  • Rising Interest Rate: High-interest rates elevate the REIT expenses and consume the reserves of shareholders' dividends. In short, soaring interest rates affects REIT operations. 

  • Economy: When the economy grows, people's purchasing power increases, creating a demand for industrial spaces such as manufacturing units. However, the economy's downfall diminishes the need for such spaces leading to their oversupply.


REITs are a more straightforward approach to accessing the different real estate sector properties. The distinctive feature of REITs is that they pay out 90% of taxable profits as shareholder dividends. Furthermore, REIT is a good investment vehicle for investors who require a stable income. 

Recently, REIT real estate investment has been a compelling option given the reduction in leverage, higher liquidity, and access to the capital market, affirming the roots of the real estate sector.


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