Collect four, five, or even six percent interest like you did in the mid-90s with a safe investment – that would be nice. In 2021, many bank customers will be happy if they don’t have to pay negative interest and earn a few tenths of interest on term deposits. Investment alternatives are all the more sought after. These include Reits (“Real Estate Investment Trust”). Anyone who relies on such special real estate investment companies can safely receive regular dividends instead of interest. As always in the capital market, the prospect of higher returns comes with higher risk.
What is behind Reits
REITs are joint stock companies that pool investor money to buy real estate. Companies are subject to a number of legal restrictions and must invest the majority of their assets in the real estate sector, for example in office buildings, shopping malls, hospitals and hotels. Investors can buy or sell Reits shares on the stock exchange like Telekom or Tesla shares and thus participate in real estate that would otherwise be unaffordable to them.
How investors can benefit
Riders are subject to specific tax privileges at company level, which depend on the legislation of their country of origin. Most of these tax benefits must be passed on to shareholders. Typically, they receive at least 90 percent of the profits as dividends. Investors, in turn, must pay tax on the dividend. Since Reits constantly receive rental income, they can usually pay dividends consistently and reliably. Some experts therefore even speak of “a sort of real estate pension” for investors.
Which runners are there in Germany
Horseback riding is popular in the United States. Investors can choose from around 200 of these listed real estate companies. They have only been approved in Germany since 2007 and are also subject to strict legal requirements. There are currently only five Reits to choose from in this country: Alstria Office, Deutsche Industrie, Deutsche Konsum, Fair Value and Hamborner, a still little-known quintet, mainly for two reasons: Sparkassen and the banks prefer to recommend open real estate funds. to their customers because their prices fluctuate much less and sales are worth for them because of the purchase costs. In addition, there are still many investors who prefer to avoid stocks as a precaution.
Why it’s worth taking a look abroad
Not only due to the limited selection in Germany, experts recommend studying driving in other countries, especially in the main US market. Investors with a securities account can also buy US-Reits in this country. One of the most important is, for example, Welltower, a company that invests in retirement homes and retirement homes. Like many other American riders, Welltower even pays dividends to German investors quarterly.
What dividends to expect
The Reits are distinguished above all by their above-average regular dividends. If you want to compare the amount with the interest on the savings, you have to look at the dividend yield, the ratio of the dividend to the stock price. It provides information on how the stock “earns interest”. The dividend yields of the US-Reits and German Reits are mostly between two and five percent.
Why riding can be risky
Prices can fluctuate considerably depending on the quality of the economy and changes in interest rates. This was especially evident during the Corona Crisis, when real estate stock prices even fell at an above average rate. Performance can also vary widely depending on the ride. Example: Alstria Office invests mainly in German office buildings. The stock price has gained nearly 38 percent in value over the past twelve months. However, this roughly matches the total performance over five years (at the end of August). German consumption, on the other hand, invests mainly in commercial real estate. Over the past twelve months, the share price has fallen a good seven percent, but has risen nearly 70 percent since late August 2016. Anyone who has docked at Reits should therefore bring in enough time. Those who shy away from such individual investments can use real estate ETFs.