On Friday in our mini-series about REITs in Canada, we looked at the different types of REITs you could buy. But there’s a lot more to choosing a REIT than just knowing whether you want one that deals in retail space or one that’s directly tied to Canadian mortgages. Just like any other shares you’re thinking of purchasing on the stock market, there are a few other important factors you have to take into consideration.
The first thing to consider is the geographical location of your REIT – is it just in one area of Canada, or does it hold properties in many different areas? Choosing a REIT that has a large portfolio, with properties in many different locales throughout the country is the best way to ensure that you’ll be investing in a diversified REIT. If a property in a struggling area does poorly, another one in an area that’s faring much better will be there to pick up the slack; unlike if you focus on only one area, where you’ll need to hope that the economy does well.
Just like any other stock you’re interested in, you also need to take a careful look at the people running and operating it. Does the management team have a lot of experience in the real estate market and mortgages? How long has the company been in business for? Experience isn’t something that should be taken lightly when it comes to investing in REITs, and a good team will know which markets perform the best and which types of REITs will deliver the most profits. In addition to that, a company that’s been around for awhile will also know how to manage their REITs and distribute their profits, making the transaction that much more seamless for you.
Lastly, you cannot forget that REITs are usually bought, sold and traded on the stock market. Because of this, you need to take into consideration the general feeling of the stock market at the time you want to invest. If investors are feeling good about it, now might be a good time to invest in REITs. If the economic outlook is shaky however, people tend to shy away from the stock market, choosing more stable investments instead. A good broker (that’s stock broker, not your Toronto mortgage broker,) will be able to tell you more about the REIT companies when it’s time to buy your REIT, and how well they’ve done so far and how experienced they are.
Now that you know what a REIT is, the different types you can invest in, and even what to look for one when considering these investment vehicles, now it’s time to look at just how REITs are expected to do in 2012. Come back on Friday, when we’ll wrap up our mini-series by taking a look at the immediate future of REITs in Canada. So make sure you come back then – the outlook is bright!
