Real estate stocks may involve publicly traded stocks for businesses that touch the real estate market in some fashion, form, or shape. These businesses may include developers, financiers, manufacturers, real estate brokers, retailers, and technology companies.
Different Types of Real Estate Stocks
Similar to other stock market sectors, there are also several sub-sectors of real estate stocks according to their businesses. Today’s real estate sector is often segmented into the sub-sectors below:
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Commercial
Commercial real estate stocks mainly develop, own, or operate retail or office space that houses different kinds of businesses.
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Healthcare
Healthcare real estate stocks manage, buy, or build facilities related to healthcare such as assisted living facilities, post-acute care centers, and senior housing.
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Residential
Residential real estate stocks involve companies that focus on the lease and ownership of properties where tenants live such as apartments, executive housing, and condos.
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Specialty
Aside from REITs investing in core property types such as commercial and residential, you can also find specialty stocks investing in things such as entertainment spaces like arenas and other kinds of venues.
On top of the different types of real estate stocks that develop, operate, or own physical properties, some stocks also invest in certain operations indirectly related to real estate. These may include companies such as mortgage REITs that invest in various securities backed by a mortgage.
Benefits of Real Estate Stock Investment
Investing in real estate stocks offers several advantages, such as the following:
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Diversity
Investing in real estate stocks allows investors to invest in an entire property portfolio represented in one ownership share.
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Liquidity
Thanks to publicly traded real estate stocks, investors can invest in physical properties without any need to buy, manage, and identify properties themselves. Investors can also have an easier time selling shares if they want access to some cash.
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Professional Management
Shareholders get a layer of professional management from real estate companies focusing on the management of the property portfolio of the company to increase shareholder value.
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Regular Income
Those investors with ownership of REITs shares often get regular dividend payments according to their investment size.
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Tax Benefits
Tax advantages await companies that earn passive income through real estate leasing.
How to Buy Real Estate Stocks
The process of investing in stocks is rather straightforward. You can do it using online brokerage accounts. One of the biggest benefits of real estate stock investment is that you don’t need a large sum of money just to get started since you would directly purchase a physical property.
It is a great help for those who wish to embark on their real estate journey but don’t have much money to invest in it just yet. Similar to buying a property, due diligence and research are necessary to find the best opportunities for real estate stock investment.
If an investment is something difficult for you to understand, you might want to avoid putting any money in it until you do. Since stock is defined as owning a small part of a business, you need to spend more time learning about the said business first.
There are several ways to educate yourself like listening to podcasts and reading blogs or books. Below are some questions you need to ask and answer to identify if it is worth it to buy a stock or not:
- Does the present stock price seem like a great buy?
- How does a company earn money?
- How can the company make more money?
- What makes the company different or better than its competitors?
- What risk can make the company fail or lose profits in the future?