Today a 10-year CSB offers a 5.5 per cent annual yield, while REIT yields range from 8 to13 per cent. However, Investors are cautioned that the higher yield of a REIT indicates that there is more risk involved than ownership of other securities with lower yields. This is because interest rates on competing investments such as government bonds will rise, making government bonds a more desirable investment than REITs. A real estate market downturn causes property values to decline and effectively lowers income streams. Similarly, a market upturn causes property values to increase, thereby increasing income streams on REITs.
Real estate is a good way to diversify an investment portfolio over the long term.
REITs offer the small real estate investor high yields, liquidity and diversification. They can be bought and sold in any amount through a brokerage firm. REITs that have good quality real estate assets and are well managed, will limit risk over the long term.