The global property sector has enjoyed strong growth since the financial crisis. A combination of low interest rates, a buoyant world economy and wide margins of safety in the aftermath of the financial crisis have produced impressive returns for many investors.
Looking ahead, there could be further growth on offer from the wider sector. One way of accessing it is through buying real estate investment trusts (REITs). They provide diversity, as well as growth potential over the long term.
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As such, now could be the right time to invest in REITs. Through having a focus on diversity, value, and exposure to fast-growing sectors, you could improve your chances of getting rich and retiring early.
While REITs can offer long-term growth potential, the property industry has historically moved in cycles. This means that, in the short run at least, there is always the potential for property prices to move lower and for investors to experience paper losses.
As such, it is prudent to own REITs that offer a degree of diversity. This could, for example, mean that they hold a wide variety of assets in different locations. Or, it could mean that a REIT holds different types of assets, such as retail, leisure and residential, in order to reduce their reliance on a specific sector.
Through buying REITs that offer greater diversity, an investor may also be able to access a wider pool of growth opportunities in what is a rapidly-changing world economy.
As such, investors may wish to focus their capital on growth areas. One such sector is logistics facilities, such as warehouses. They are becoming more in-demand as online shopping businesses enjoy a tailwind from increasing consumer demand. Positioning a portfolio so that it is concentrated in faster-growing sectors, such as warehousing, could lead to higher returns in the long run by tapping into a long-term trend.
Although global property prices have made gains in the last decade, a number of REITs continue to offer good value for money. In some cases, they may trade below their net asset value, which could represent a low valuation that produces an impressive rate of capital growth over the long run.
Due to the cyclicality of the property industry, it may take time for undervalued REITs to narrow the gap between their market value and intrinsic value. However, by holding on to undervalued assets over the long run, an investor may increase their chances of getting rich and retiring early.
Want to keep reading on how to lock in those sweet REIT dividends? Our Complete Guide To Buying The Best Singapore REITs dives into what we think you need to know about finding the best REITs that regularly hand you a fat dividend cheque. Click here to download your FREE guide.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.