Recently, I was chatting to a girlfriend who mentioned that she wanted to invest in property but didn’t have the cash to do so.
She wanted the returns of the Australian property market without committing herself to purchasing an entire house. However, you really don’t have to – it is still possible to get real estate exposure in your portfolio.
How? The short answer is REITs.
What is an REIT?
“REIT” stands for real estate investment trust and is an investment product that gives investors exposure to property assets. Australian REITs are known as A-REITs and are publicly listed on the Australian Stock Exchange.
This means you can simply buy into these funds like you would a stock or ETF and can put in as little as $500. There are different kinds that provide exposure to retail, industrial, residential and even office buildings.
Furthermore, you can also invest in funds that hold a number of different REITs. One example is the Vanguard Australian Property Securities Index Fund (VAP) which uses S&P/ASX 300 A-REIT Index as a benchmark.
Would I invest in a REIT?
No, I wouldn’t. The reason for this is lack of diversification. I would like to purchase a home in the future that would be a large percentage of my net worth and if I started investing in REITs, I would be too overweight in one asset class.
However, I think it is a great option for those who won’t be purchasing a home within the next decade or so, or simply want diversified real estate exposure.