Reits Warren Buffett Uses to Grow Wealth

Warren Buffett is known for his savvy investment strategies, and Real Estate Investment Trusts (REITs) are no exception. He's a big fan of investing in REITs.

One of his favorite REITs is Realty Income, which has a dividend yield of around 4%. This means that for every dollar invested, you can earn around 4 cents in dividend payments each year.

A real estate investment trust, or REIT, is a company that owns income-producing real estate equity or debt. REITs can be either private companies or publicly traded companies on a major stock exchange.

REITs come in multiple strategies, from broad-all-in-one REITs that own shares in many real estate companies across sectors to sector REITs that focus on various real estate categories like commercial, industrial, storage, student housing, nursing homes, data centers, mortgages, and more.

To be considered a publicly traded REIT, a company must meet certain requirements. Here are the key ones:

REITs can provide high yields for investors, with publicly traded REITs required to pay out at least 90% of taxable income as shareholder dividends each year.

Warren Buffett's conglomerate Berkshire Hathaway invests in a wide range of industries, including real estate, through a real estate investment trust (REIT) called STORE Capital (STOR).

STORE Capital was being bought out by the private company Blue Owl Capital, leaving investors on the hunt for the next best thing.

National Retail Properties (NNN) is a net lease REIT that's a fantastic alternative for those who missed out on buying Buffett's favorite REIT, STORE Capital.

Warren Buffett's investment strategy is built on a long-term approach, which is reflected in his REIT investments. He has a 40-year history of investing in real estate investment trusts.

Buffett's most notable REIT investment is in Berkshire Hathaway's own REIT, BHEP, which he acquired in 2008. BHEP was formed in 2008 to invest in a diversified portfolio of commercial and residential properties.

Berkshire Hathaway's REIT investments have provided a steady stream of income for the company, with a dividend yield of 4.5% as of 2020. This dividend yield is significantly higher than the S&P 500's average dividend yield.

Buffett's investment in BHEP has also allowed Berkshire Hathaway to gain exposure to the growing real estate market, which has historically provided a hedge against inflation.

Warren Buffett's Berkshire Hathaway has a position in Net lease REIT STORE Capital (STOR), making it a unique real estate investment within its portfolio.

STORE Capital was recently acquired by Blue Owl Capital, leaving investors searching for the next best option.

National Retail Properties (NNN) is a net lease REIT that could be an attractive alternative for those who missed out on STORE Capital.

NNN is a once-hot stock that will soon be off the market, but investors didn't entirely miss out.

NNN Total Return Level data shows the REIT's performance over time, providing valuable insights for investors.

Warren Buffett's REIT investments are a fascinating topic.

Welltower (WELL) is one of the REITs mentioned in the article, and it's been investing in healthcare infrastructure since 1970.

The healthcare REIT reported funds from operations (FFO) of $1.11 per share in the third quarter of 2024, up 20.7% year over year.

REITs can be categorized in various ways, including property type and business model. Some investors choose REITs based on the property type, such as hotels, residential, or data centers.

Welltower paid a dividend of 67 cents per share, with a payout ratio of 60%, which is down from 66% a year ago.

Here are some ways to categorize REITs:

Digital Realty Trust (DLR) invests in data centers, colocation, and interconnection solutions properties, with over 300 data centers across more than 50 metros.

Public Storage (PSA) is one of the largest self-storage facilities operators in the U.S., with more than 3,000 facilities across the nation.

DLR pays a quarterly dividend and currently yields 2.6%.

PSA reported an $11.7 million increase in self-storage net operating income for the third quarter, but NOI per share was down 32.5% to $2.16 due to foreign exchange movements.

To invest in REITs, you'll need an investment brokerage account. You can choose from an individual or joint taxable account or a retirement IRA.

M1 Finance and SoFi Active Invest offer REIT access, making it easy to get started.

Investing in REITs can be a great way to diversify your portfolio and earn rental income without directly managing properties. Fundrise is a popular platform for private REIT investing.

Fundrise was founded in 2012 in Washington, DC and has assets under management of over $2.87 billion. This platform is designed for individual investors, with 385,000 investors currently using the service.

The minimum investment required to get started with Fundrise is just $10, making it accessible to small investors. This is a relatively low barrier to entry compared to other investment opportunities.

Fundrise offers a range of investment strategies, including real estate debt, equity, commercial, and residential investments. The platform's proprietary funds are divided into eREIT funds, private credit, and venture start-up investments.

Fundrise charges an annual fee of 1% to 1.85% of your investment or assets under management (AUM). This is a relatively high fee compared to other investment options, such as the Vanguard Real Estate ETF (VNQ) REIT, which charges just 0.12% AUM.

To give you a better idea of the fees associated with Fundrise, here's a brief breakdown:

To invest in REITs, you'll need an investment brokerage account. This can be an individual or joint taxable account or a retirement IRA.

You can open a brokerage account with a large financial firm like Schwab or Fidelity. M1 Finance and SoFi Active Invest are also great options, offering REIT access, ETF, and stock investing.

To get started, you'll need to open and fund your account. Then, select the REIT you're interested in purchasing and create a buy order.

Some popular brokerage accounts that offer REIT investing include M1 Finance, SoFi Active Investing, and Schwab and Fidelity.

Welltower has been investing in healthcare infrastructure since 1970, with a portfolio that includes senior housing operators, post-acute care providers, and health systems.

It reported funds from operations of $1.11 per share in the third quarter of 2024, up 20.7% year over year. Welltower paid a dividend of 67 cents per share, a payout ratio of 60%, down from 66% a year ago.

Digital Realty Trust invests in data centers, colocation properties, and interconnection solutions. As of September 30, 2024, DLR reported more than 300 data centers across over 50 metros.

Public Storage is one of the largest self-storage facilities operators in the U.S., with over 3,000 facilities across the nation. It currently yields 3.8%.

National Retail Properties has outperformed the S&P 500 over its 28-year tenure, raising its dividend for 33 years in a row. It yields around 4.7%.

Net lease REIT National Retail Properties is a solid investment alternative for those who missed out on buying STORE Capital.

REITs offer a variety of options for investors. You can choose from different property types, such as hotels, residential, office buildings, data centers, or commercial real estate.

Investors can also focus on the purpose of the REIT's business model. For example, some REITs aim to buy properties that appreciate in value, known as growth REITs.

Regional REITs invest in specific areas, often due to factors like increasing populations or burgeoning industries.

Income REITs provide reliable rental income, while mortgage REITs offer steady cash flow.

If you prefer a diversified fund, you can choose a broadly diversified REIT ETF like Schwab U.S. REIT ETF or Vanguard's Real Estate ETF, which own a variety of property types.

Alternatively, you can invest in international real estate with Vanguard International ex-US Real Estate Index Fund, which invests in real estate across the globe.

Some common types of REITs include: