Many different things make an investment profitable, it really depends on the investment. In a Real Estate Investment Trust (REIT) there are certain things to take notice of in order to determine if the investment is a good deal. Some of the things to evaluate and look for in a REIT are listed below.
The type of property a REIT owns should always be known by the share holder. If the properties are all one type than during certain times a REIT could suffer. Basically as in most things diversification is key to a strong development that is secure. If a REIT only invests in office space than for a time this could be highly profitable.
When the economy is strong and many businesses are open, but when a tough time hits this may be a bad plan. Many businesses close, thus office space is released and vacant therefore REITs that have not diversifies will be at risk. The other option is for a REIT to focus on rental properties, these tend to hold occupancies in hard times and thus produce your passive income.
Everyone needs a place to live, thus when businesses are declining rental housing will still be in use. A REIT should not just invest in one of course, but should mix up the two. The office properties will help with higher renting rates, where as the rental housing will help to provide a steady stream of income during all times.
Another thing to know about the REIT you may be wanting to invest in is where the properties are located. Geography is very important when it comes to real estate, and if your property is in a good place it is more likely to be used. The REIT should have properties in or around cities that are growing and the economies should be doing well.
There are areas in all communities that have bad spots so be sure to research and make sure your REIT is not just investing in such places. REITs have many aspects to look at so make sure you are knowledgeable on everything it takes to have a successful piece of real estate.