Indirect Hawaii Real Estate Investments

Old John T. Waterhouse, Jr., home, Wyllie St.,...
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If you don’t want the inconvenience of directly supervising your real estate investments, you can still enjoy the profits from real estate with a Real Estate Investment Trust (REIT).

Honolulu Real Estate Investment Trusts are designed to give small investors the opportunity to participate in professionally-managed real estate ventures with limited personal liability. The typical direct real estate investor has to provide a personal guarantee to obtain financing, and one bad decision can have devastating financial consequences. REITs are publicly traded, and risk is limited to the amount invested. Furthermore, shares in a REIT are more liquid than a house or building. You can sell your shares at market value any time. And because REITs are required to pay out profits to investors, they are an excellent source of retirement income.

There are several different types of REITs. Each has its own advantages.

Residential REITs invest in residential real estate—usually apartment complexes. The biggest risk is an oversaturated market. You can enjoy rental profits without being bothered by tenant problems or threatened with financial liability if a tenant falls down the stairs.

Retail REITs build and operate shopping centers and malls. They typically have projects in multiple states, so risks of localized economic downturns are minimized.

Office and industrial REITs invest in commercial real estate. Long-term leases make this an extremely stable alternative, especially in periods of economic decline.

Health care REITS build, buy, or lease hospitals, medical offices, nursing homes, assisted living facilities. This is one area that is relatively unaffected by economic downturns. However, this sector is highly dependent upon government health care programs, so health insurance reforms may have an impact on these investments.

Self-storage REITs are another investment category that is somewhat recession proof. The majority of tenants are corporate or business clients.

Hotel and resort REITs are among the most responsive to economic fluctuations in the immediate location of the investments. Both market saturation and current economic climate can affect profits in this area.

Mortgage REITs do not directly own or manage properties. Instead, they finance mortgages secured by real estate.

Hybrid REITS have a portfolio that includes both mortgages and direct ownership of real property.

REITs offer an excellent way for the small investor to take advantage of the stability and profitability of real estate. One can get started with just a few thousand dollars, and returns average about 8% per year. REITs can be an excellent way to diversify an investment portfolio, as their performance doesn’t always follow stock and bond trends.

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