Infrastructure REITs are real estate investment trusts that invest in a property class that many people don’t consider when they think about real estate investments. These REITs own certain pieces of infrastructure, like data networks and energy pipelines, that are essential for our daily lives
What are Infrastructure REITs?
Infrastructure REITs own and manage properties used by cellular and wireless communication providers. They then collect rent from tenants that use the property. This may include:
Benefits of Infrastructure REITs
- Lease Structure: The lease structure for these properties is primarily long-term. A common lease is for 5-10 years, with automatic rent increases built right in. This helps maintain profits and makes them easier to predict.
- Regulations and Zoning: Since there are actually a lot of limitations when it comes to regulations and zoning for communication tower supply, this is great for Infrastructure REITs. This means there is less chance of oversupply and better opportunities for tenant retention and pricing power.
- Increasing Value: Real estate and infrastructure projects can also be sold at some point when they rise in value so much that the REIT feels it is best to take the money, thus returning more dividends to investors.
Risks With Infrastructure REITs
Interest Rates: As with all REITs, interest rates are a risk to keep in mind. When the interest rates go up, it’s not good for share prices. Higher returns are expected on investments that are income-based...but the interest rates can deter that from happening. When interest rates are on the rise, the demand for REITs goes down. Some investors will go for safer, lower-risk investments instead.
New Regulations: Although regulations and zoning limitations are a benefit, there is also a risk for new regulations. They can be costly changes to an investment with an already diverse nature.
Investing in these types of REITs can be a great way of making passive income. Like with most REITs however, a long-term investment is the key to making the most in returns. While keeping in mind the risks along with the benefits, and paying attention to the economy and interest rates, Infrastructure REITs are a rather low-risk investment with the potential for great rewards.
Best Infrastructure REITs
|Number of REITs||4|
|Average Dividend Yield||4.42%|
|YTD Total Return||-24.62%|
|September Total Return||-8.88%|
|2022 Total Return||-28.61%|
Quarterly Performance Data
|Financial Metric||Q2 2023||2023|
|Dividends Paid ($M)||$1,590||$3,115|
All Infrastructure REITs
REITs provide a low-cost and simple way to invest in real estate. However, they aren't the only option available to generate passive income through real estate with a low minimum investment.
Real estate crowdfunding offers investors the ability to decide which properties they want to invest while still enjoying passive income at a fraction of the cost of traditional methods of investing in real estate. Here are some of our favorite real estate crowdfunding platforms:
Frequently Asked Questions
Are REITs good investments?
Yes, REITs are good investments because real estate tends to be a fairly safe investment compared to other channels.
Can you get rich with real estate?
Yes, you can make very good money working in and investing in real estate, depending on how much you plan to invest or the segment of the industry you wish to work in.
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