Many people think that real estate investing requires you to own property. This can be discouraging for those who may not have enough capital to go out and buy commercial or residential property for a real estate investment. However, there is a way that you can get involved in real estate investing without owning property. You can do it through Real Estate Investment Trusts (REITs).

What is a Real Estate Investment Trust?

A REIT is a company that owns a variety of different income-generating properties. It doesn't matter what the property is--residential, commercial, warehouses, etc. A REIT may also include the financing end of real estate, such as mortgage companies. REITs are traded on the stock market, much like other securities. There are about 190 registered REITs that you can invest in. This will give you a chance to add diveristy to your investment portfolio by investing in real estate, but you won't have to come up with the capital needed to buy property. You can choose to invest in an equity REIT (owns property), mortgage REIT (financing property mortgages) or a hybrid REIT (which does a little of both).

Buying into more than one REIT

Much as you can buy sector mutual funds that offer you a piece of several difference companies in one particular sector, it is possible to purchase real estate exchange traded funds that allow you to dip into several REITs buy purchasing on ETF. The Dow Jones U.S. Real Estate IYR by iShares allows you to invest in 75 different REITs at once. This can be quite helpful, as it allows you to broaden your REIT base. However, you should be cautious about investing in something that is not terribly diverse. As long as you limit such funds to just a portion of your investment portfolio, it shouldn't be a problem.

Making real estate investing decisions

As with any investment, it is important to check into your decisions concerning real estate investment trusts. Is the REIT solid? What REITs are lumped into a particular fund? Also, check the fundamentals of the market sector in general. Real estate generally does well, but it is in a bit of a slump now. If you have the time to wait for the turnaround, buying now can get you a good price, and it is likely to grow in the coming years.

A real estate investment can make a nice addition to your investment portfolio. It adds diversity, and provides a relatively solid investment that is likely to grow. And, with help from a REIT, you do not have to own property to become a real estate investor.