Invest in property with these 5 Reits
One of the best ways to invest in property is with a real estate investment trust (Reit). Rupert Hargreaves looks at five cheap options.
If you’re looking to invest in property, but don’t have the money or time to buy physical bricks-and-mortar, real estate investment trusts (Reit) are an excellent alternative.
These investment vehicles allow investors to buy an interest in a portfolio of real estate.
There are Reits that own central London commercial property, large warehouses, private rental properties, theme parks and medical facilities just to name a few.
Investors can buy shares in these trusts for just a few pounds, and pick up a regular income from property. Reits have to distribute all of their rental income otherwise they have to pay corporation tax. This means these businesses have a financial incentive to return cash to investors.
And right now, the turbulence in the UK financial markets means many of these equities are trading with high single-digit dividend yields.
With that in mind, here are five cheap Reits worth taking a look at today.
An easy way to invest in property
Investing in buy-to-let property can be a costly and time-consuming enterprise, but Residential Secure Income (LSE: RESI) offers a way to invest in the sector with little to no effort.
At the end of June, the group owned 3,291 homes with a value of £389m split between affordable shared ownership and retirement rentals across the UK.
Further acquisitions are planned to grow the value of the portfolio. This type of property can also be a great hedge against inflation. Residential managed to push through inflation-linked rental reviews on 1,142 of its properties during the third quarter.
Rental income from these homes supports the group’s dividend. The yield currently stands at 5.8%.
The best Reit to invest in for growth potential
One of the best ways to invest in property right now, particularly a diverse property portfolio is Landsec (LSE: LAND).
The largest listed Reit in the country, it owns approximately 24 million square feet of retail, leisure and workspace assets. Around 65% of the portfolio is London-based and it has started moving into property development after acquiring MediaCity and U+I in late 2021.
As the group focuses on building out its footprint, there’s scope for its dividend and asset base to grow in the years ahead. The stock currently offers a dividend yield of 7.2%.
The best Reit to invest in for e-commerce growth
The booming e-commerce industry has lit a fire under the demand for so-called big box sheds, the huge warehouses that help retailers fulfil orders.
Also in demand are smaller facilities that allow retailers to process orders closer to their destination, and that’s where Urban Logistics (LSE: SHED) comes into play.
Urban owns 113 “mid box urban logistics assets” with £53m of developments in the pipeline. Occupancy is high and there’s a growing demand for new facilities from retailers already fighting over space. Management thinks the group can use the mismatch between supply and demand to push up rents, and this could lead to higher returns for investors.
The stock currently yields 5.8%.
A REIT benefiting from record demand
Tritax Big Box Reit (LSE: BBOX) builds and owns the facilities that hold goods before they move into Urban’s warehouses.
According to the company’s latest figures, demand for these big boxes is reaching unprecedented levels and there was a “record market take-up” of big box floor space in the first half of 2022. For those who want to invest in property, this company offers a way to gain access to a unique sector.
Tritax is capitalising on this market growth. It achieved 10.5% in its contracted annual rent roll during the first half of 2022 “primarily through development letting activity.”
With 3.4m sq ft of new space also under construction, it looks as if there’s plenty of scope for earnings growth from the group in the years ahead.
The stock currently offers a dividend yield of 5.1%.
Get access to the best property deals with this Reit
My final pick for this article is Custodian Reit (LSE: CREI) one of the most diversified Reits on the market. It has 160 assets with 347 tenancies across multiple property sectors.
Managed by Custodian Capital, which looks after £15bn of assets for clients around the world, Custodian is backed by a deep-pocketed backer with access to the best deals.
With a dividend target of no less than 5.5p per share this year, the stock’s yield sits at 6.4%.