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Anyone can own a skyscraper:

With equity REITs, or real estate investment trusts, any investor can own a piece of a skyscraper. Real estate investment trusts, through experienced management teams, purchase and manage commercial real estate. When you purchase shares in a REIT, you become a partial owner of those properties. From this perspective, you’re also a partial owner of an operating business that manages properties for profit.

Investment returns through dividends:

Equity REITs are not taxed at the corporate level. They are also required by law to pay out 90% or more of their profits as dividends to the investors. The best real estate investment trusts hire the best management teams. Their job is to manage the properties to maximize rental income and profits. With equity stocks, management decides whether to pay dividends or plow profits back into the company. With REITs, each investor can make their own decision about what to do with their dividends.

Low volatility and low correlation:

REIT share prices enjoy lower volatility than equity stocks. They also have a low correlation to the performance of other asset classes. This means that they do not normally act the same as equity stocks or bonds. For this reason, they are useful for the diversification of portfolios. When stock prices are down, your REITs will normally perform better, thus balancing the performance of your portfolio. As rental income is very predictable, analysts can be very accurate in their predictions for the performance of REITs. This reduces share price volatility.

Investment returns through appreciation:

Though you won’t experience the magnitude of price rises of equity stocks in a good market, REITs have historically performed well due to the steady long-term appreciation of commercial real estate. Short term fluctuations in inflation and interest rates do not normally impact commercial real estate and REIT share prices as much as they do equity stocks. Bond investments can provide reasonable returns with acceptable risk, but most bond classes have fixed values with no opportunity for appreciation.

Property management without the headaches:

REITs allow the average investor to own commercial real estate. The investor also enjoys the benefits of experienced property management without the headaches. A carefully selected management team handles marketing, rent collection, tenant management, and facilities maintenance. All the REITs investor must do is collect their dividends at the mailbox.

REITs investors receive 90% or more of the profits of commercial property management and ownership as dividends. If the investor chooses to reinvest, they simply purchase more shares of the REIT. If they’d rather use their dividends for a vacation, they can do that also. Dividends are normally steady, with the opportunity of appreciation as rent levels increase. Appreciation can also be realized through the increased value of the properties owned.

REIT share prices are less volatile than equity stocks on the whole. This is because rental income and management expenses are predictable in both long and short time frames. Analysts can predict the performance of REITs more easily than they can that of equity stocks. As REIT share prices perform with low correlation to equity stocks and other investment classes, REITs are useful for portfolio diversification.