Are these the best REIT stocks and ETFs in the UK?

Real estate investment trusts (REITs) are a great way to access the UK’s property market via a stocks and shares portfolio. Read on to learn everything you need to know about choosing a REIT and investing in the property market.

What you need to know about the best real estate investment trusts (REITs)

REITs are property trusts which invest in different types of property, generating income and capital appreciation. Investors and traders can access REIT stocks directly via companies such as British Land, or via a dedicated exchange traded fund (ETF) which tracks an index performance.

UK investors are spoiled for choice when it comes to choosing a REIT. There are dozens of options offering access to niche markets such as social housing, as well as commercial, industrial and residential properties, and overseas real estate. The best REIT for you will depend upon your individual risk profile and the type of market you want to access. For instance, a trader may want to invest in a REIT ETF which has a high degree of liquidity; whereas a long-term investor may prefer to take a long position in an up-and-coming REIT stock.

The best REITs offer instant access to the ever-active real estate market, without any need for a mortgage or a deposit. Simply choose your REIT or REIT ETF, and start investing or trading.

It is important to ensure that you choose the right REIT for your individual needs. For some investors, that might mean choosing a UK REIT, which invests in UK real estate. Others might seek out REITs which can meet certain environmental, social and corporate governance (ESG) requirements; while others may prefer to invest in overseas property via a Japan-focused REIT, a US-based REIT, or even a global REIT ETF.

ETFs offer exposure to multiple stocks, shares and funds with one investment, so that you can ensure that you have a highly diversified portfolio, rather than relying on the performance of one or two REIT stocks.

You can trade or invest in REIT shares and REIT ETFs with us. Open an account to get started.

British Land REIT

One of the best UK REITs, British Land is a FTSE 100 company which has been operating as a REIT since 2007. The company itself has been in existence since 1856 with one simple remit – to buy and sell British land.

By the end of March 2020, the company’s portfolio was valued at £11 billion, although it is believed to have lost approximately £1 billion due to the Covid-19 pandemic. British Land owns more than 50 acres of central London, including iconic locations such as Broadgate, Regent’s Place, and Paddington Central.

As a REIT, 90% of the company’s tax-exempt profits must be distributed to shareholders. It pays dividends twice a year, with each dividend usually amounting to between 6p and 8p per share.

Secure Income REIT

Another REIT with a UK focus, the Secure Income REIT specialises in generating long term, inflation protected income from real estate investments across the country. Long-term tenants include Merlin Entertainment, and Travelodge Hotels, as well as a number of private hospitals and High Street pubs. By 31 December 2020, its portfolio was valued at just under £2 billion.

This eclectic portfolio offers a cross-section of the UK commercial property space in a single investment. Despite a pandemic-related slump during 2020, the Secure Income REIT paid a robust dividend of 15.15p for the year, down only slightly from the 16.53p dividend, which was paid out across 2019.

Triple Point Social Housing REIT

One of the best REITs for community-minded investors, the Triple Point Social Housing REIT has tapped into the growing ESG trend with its social housing REIT. Established in 2017, its primary objective is to invest in social housing assets across the UK, with a particular focus on supported housing.

Since its IPO, the Triple Point Social Housing REIT has acquired 445 supported housing properties with a total value of approximately £571.5 million.

During 2020, the group extended a revolving credit facility to buy up a number of new properties, while continuing to pay out a dividend of 1.295p per ordinary share on a quarterly basis.

iShares UK Property UCITS ETF

One of the few UK REIT ETFs, this fund seeks to track the performance of an index composed of UK-listed real estate companies and REITs, including popular REIT stocks such as Segro, Land Securities Group, and British Land.

It has a distribution yield of 1.77%, with dividends paid quarterly. However, due to its laser focus on established UK REIT shares and listed property companies, its stock price is vulnerable to macroeconomic factors. For example, at the beginning of the UK’s first Covid-19 lockdown in March 2020, the iShares UK Property UCITS ETF saw its share price drop to an all-time low. When the second 2020 lockdown began, it took another dramatic tumble. However, since then the share price has been on an upward trend, in line with its tracker index and the economic recovery.

Vanguard REIT ETF

If you find it hard to select the best REIT in the UK, a US-focused REIT ETF may be right for you. The Vanguard REIT ETF looks beyond the UK to track the MSCI US Investable Market Real Estate 25/50 Index. It does this by investing in REITs, companies that purchase office buildings, hotels, and other types of commercial and residential real estate.

Since its launch in 2004, the $73 billion (£51.5 billion) fund has returned more than 9% in annualised average returns to its investors, making it an attractive long bet.

How to trade or invest in REITs

Before trading or investing in any REIT, it is important to do your research. Make sure you understand the limitations and risks involved with REIT investing, and decide whether you would rather trade or invest directly in REIT stocks and shares, or pool your money in an ETF, which offers access to a range of funds within one position.

  1. Choose whether to trade or invest
  2. Create an account or log in
  3. Select ‘buy’ or ‘sell’ in the deal ticket
  4. Choose your position size and take steps to manage your risk
  5. Open and monitor your position

Since CFDs are leveraged, it’s important that you take steps to manage your risk because leverage can increase both your profits and your losses.

Investing in REITS is different to trading because when you invest, you’re taking direct ownership rather than just speculating on share prices. Leverage isn’t available for investments, so you’ll need to commit the full value of the position upfront. While this can increase your initial outlay, it also caps your risk.

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