The increasing demand for REIT stocks gave way to the rise of online platforms mainly intended for REITs. This way. investing in real estate becomes more accessible even to low-income earners. Online REITs are online investments in REIT stocks. Specifically, eREITs are real estate investment trusts that use traditional and cutting-edge investment strategies. They purchase commercial and residential properties, which are eventually sold to generate income for investors.
With eREITs, you will have a stable source of income because eREITs distribute dividends on a quarterly basis. Not only that, but it also offers a hassle-free earning from properties because they are the ones who’ll manage the property. You just need to invest money in them so they can operate the business.
Diversification is important when it comes to investments. When you put your funds into different investment opportunities, you’ll get higher returns and a lower risk of losing your money. What’s so great about eREITs is that they give you access to a wide range of real estate investment options to diversify your profile. These online platforms offer you diversification opportunities in almost every major market across the country. You’ll surely find one that is perfect for your portfolio.
Are eREITs better than traditional publicly-traded REITs?
Online REITs offer a new avenue for real estate investors to invest in a wide array of properties available across the country. The fact that eREITs are done online, giving a whole new level of convenience to investing, is enough to back up the claim that eREITs are better than traditional publicly-traded REITs. Below are specific reasons to further convince you.
Accessibility. With the explosive growth of eREITs, lots of diversification opportunities have become accessible to investors, as many as the available traditional publicly-traded REITs.
Lower Operating Costs. Because publicly-traded REITs are publicly listed, they come with much higher operating costs. eREITs don’t have the expenses of being publicly listed, making them leaner structures that can make more in good times and operate even in bad times.
Transparency. Transactions in eREITS are done online, and this will give you a record of all your transactions on the platform. The platform will also notify you of these transactions.
Higher Dividend Yield. Over the past 10 years, the average dividend yield in eREITs has been around 8%, while the traditional publicly-traded REITS are only around 5.5%.
How to Diversify your portfolio with eREITs
eREITs are a good addition to your profile because they offer diversification opportunities to give you higher returns on your investment. There are just two things you should look for when choosing an eREIT platform, namely diversification opportunities and a good reputation.
Diversification Opportunities. Avoid putting all your funds in a single property. As they say, when investing, do not put all your eggs in one basket. Look for a platform that can give you a wider range of investment opportunities to diversify your profile. When you spread your investment across multiple properties, you are reducing risk and increasing reward potential.
Good Track Record and Reputation. Look for a company that has the experience, skills, and knowledge when it comes to real estate investment trusts. An eREIT that has a track record of success over the last 10 years, 5 years, or 2-3 years is good enough to entrust your money to. Annual dividend growth of 8% or more can tell you that a company has an excellent strategy to make the most of your money.
The best and most popular eREITs currently are Diversyfund and Fundrise, however when you compare Diversyfund vs Fundrise they are very similar, and for European investors in particularly Fundrise shows to be the better choice, especially if your goal is to diversify your property holdings, as they offer many more types of funds around the world that’ll help you diversify.
How much of your portfolio should be in eREITs?
We aren’t financial advisors, but we believe that eREITs deserve a minor part of your overall portfolio. A good rule of thumb is to allocate 5% to 10% of your assets to REITs, and a portion of this percentage should be invested in eREITs. It doesn’t matter how much you invest, as long as you diversify your portfolio by allocating a percent of your assets to eREITs, you will secure a stable income over the years. eREITs are one way to lower your risk while increasing both the amount of income you receive from dividends as well as your capital gains over time.
Overall, eREITs are a great addition to any investor’s portfolio. It allows you to access the real estate market without all the hassle and headache of managing actual real estate. So if you’re discouraged from real estate investing because of all the hassle of operating a property, then eREITs are perfect for you.
With lower operating costs, performance on par with public REITs, and a higher dividend yield, eREITs are a great way to diversify your portfolio while still engaging in the real estate market. However, you should check first all the available eREITs platforms when choosing one.
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