Historically, the only way to invest in properties was to buy, manage, and rent out the property yourself. Investing in property became much easier and more accessible to the public thanks to the creation of real estate investment trusts (REITs) in the 1960s. REITs are companies that own, operate, or even finance real estate that produces income, such as strip malls, healthcare facilities, factories, residencies, and more. By leasing these spaces, the company can generate income by collecting rent and paying it out in dividends to their shareholders—typically about 90 to 100 percent.
However, traditional REITs leave gaps in the short-term rental market. Short-term rentals alone can be very lucrative, but the traditional way of investing in them requires a lot of personal time and effort. Fortunately, short-term rental REITs are quickly becoming popular, and if you’re looking for a unique way to invest in rental properties, here’s why you should consider investing in them.
Easy To Invest In
As mentioned, the traditional way of investing in short-term rentals involves much more marketing and managing in comparison to long-term rentals. With short-term REITs, you garner all the benefits of investing in a short-term rental with a fraction of the work. Plus, investing in REITs is incredibly easy. All you need to do is purchase a share in a REIT listed in a major stock exchange, mutual fund, or exchange-traded fund.
Investing in a short-term REIT allows you to easily invest in a portfolio of properties that you may not normally have access to. By spreading your assets across geographic locations and property types, you reduce the risk of your income taking a hit. Plus, short-term rentals, such as vacation rentals, tend to see a downturn throughout the year, but with REITs, you reduce the impact of vacancies or downturns in the market. Plus, with short-term REITs, you can adjust the price as needed, which means properties can adapt quicker to market changes.
Recurring Passive Income
One of the main reasons why people invest in REITs in the first place is for the chance to make consistent, passive income. However, short-term REITs take this to a new level. In general, short-term rentals tend to make more than their long-term counterparts, as you can charge a higher rate per night or lease. These higher rates mean that you have a much better chance of receiving greater passive income with short-term REITs compared to traditional REITs.
Now that you know more about what short-term REITs are and why you should invest in them, the question now becomes, “Is investing in short-term REITs right for me?”
Let Excalibur Homes help if this type of investing interests you. We offer a wide array of property management services to make passive income easier for investors like you.