Anybody knows how to get financed for buying REITs?
REIT= Real Estate Investment Trusts (usually publicly traded).
Acquired REITs are used as guarantee for the lender.
The level of risk on the REITs is exactly the same as for any real estate property (actually even less as its mutualised risk).
Are you looking for financing to acquire REIT stock or to acquire an entire REIT? The risk associated with REIT stock is more closely correlated with overall stock market risk rather than real estate risk.
Not really. Although public REITs are traded on the market in the same way than stocks, they are, in essence, totally différent. Because REITs are just mutualizing buying and managing RE. Most of those companies are not authorized to do anything else than buying commercial or residential properties and rent them (equity rents). That’s why, when you look at their long term performance (10-20 years graphs), they follow EXACTLY the RE market, and NOT the stock market.
The risk of devaluation for a REIT is exactly the same as for a property.
The only similarity with stock market is that you publicly trade them in the same manner and that you buy a share of properties.
Avantages of buying REITs rather than directly a property is that REITs buy big amounts of properties, diversify their portfolio, manage the properties, thus reduce the risk and the burden of management.
Yes I’m looking for the right financing scheme for creating a portfolio of REIT shares, for a total amount of 250 to 350k. Does anybody has an idea how to get such a loan/credit?
I HIGHLY doubt you will find financing for something like that. It’s like borrowing money to play the stock market, not going to happen. Yes, I understand that the stock market and what you’re talking about are totally different but I think the same general rules regarding borrowing money to invest in them will apply.
REIT stocks have a market beta of .3-.5, meaning 30-50% of their volatility is driven by overall equity market volatility. While they offer a good opportunity to own an interest in a diversified and professionally managed portfolio of real estate their returns are still heavily dependent upon stock market fluctuations.
Banks will make loans secured by equity securities but I doubt the terms would make this a viable option in financing a portfolio of REIT stocks. If you have an IRA or 401k plan your plan sponsor may offer REIT funds as an investment option.
Or you can take an equity loan out of your current home. Rich is correct. You will find it difficult to find an unsecured loan in which the funds will be used for investment purposes.