Indirect real estate investments
How to become an indirect real estate investor
Salaam aleykum!
Investment into real estate seems so unattainable, but there is hope. READ ON!
All investments can be either direct or indirect. In the real estate realm, direct is when we acquire and/or manage actual physical properties. The current market is an insanely bullish/seller’s market, which means prices are literally through the roof, demand is super crazy, inventory is low due to a number of factors, etc.
Luckily for you and I, there is another way to get into real estate. And that is through indirect investment. Indirect investment is basically acquiring an ownership interest through intermediaries that are in the business of purchasing and managing properties. Here are some ways to become an indirect real estate investor:
Stocks - An obvious way to gain exposure to the real estate sector is to acquire shares in publicly listed property companies that are traded on exchanges/markets. Because many real estate companies are now organized as real estate investment trusts (REITs), investing in real estate stocks these days is generally associated with buying shares in publicly quoted REITs.
REITs - A Real Estate Investment Trust or REIT is a type of investment vehicle that enables investors to pool their money and invest in real estate markets. Refer to this blog for a primer on crowdfunding/halal equity investments. REITs own, and in most cases operate, income-producing real estate or real estate-related assets. A major attraction for income-seeking investors is that REITs are generally required to distribute a specified percentage of their taxable income to stockholders annually, usually at least 90%, but many REITs pay out 100% (or even more). As a result, REITs offer investors the potential of a significantly higher dividend yield than other equities do.
To get started with REITs - Check out the steps below:
You can go to this site - The ETF Screen
Select “Not-Leveraged Only” via the Starting Choices
Look for REITs with 6 months or 1 year returns greater 5-10%
Do more research considering the fees, the people or entities that manage the assets, starting with the REIT's website.
Be very intentional about where you put your money. As you know, we like to keep it Halal and barakah’d all the way up on this blog.
Lastly, go to your preferred broker platform or the REIT's direct website and start investing. SIMPLE.
There are different property sectors that REITs specialize in and you can read more about them via NAREIT. Data Centers are gaining a lot of traction these days due to the amount of data that needs to be stored, residential is always needed. Office REITs may not be the way to go due to the you-know-what we’re all dealing with that is causing the work from home wave. BUT, please note this is not investment advice. Always do your own research and base your investments on your convictions.
Access to REITs can be by purchasing shares in:
Individual REITs listed and traded on major global stock exchanges
Funds that focus on REITs
Examples of fund structures offering access to REITs include:
Mutual funds/open-ended funds
Exchange-traded funds (ETFs)
Closed-end funds
Global/international funds
The great thing about investing in the U.S. is that there is no minimum investment in assets such as stocks or REITs since we can buy fractional shares of basically anything. But again, be sure to never invest more than you can afford (i.e., losing it or part of it is going to bring out some ugly crying).
There are other options to indirectly invest in real estate, but the two vehicles mentioned above are the most common and most accessible for individual investors like us. Wishing you tons of barakah in these investments and DO tell a friend!