This post is also available in: Indonesia Português العربية
Do you trade on Olymp Trade and have experience with Forex currency pairs, stocks, or commodities? Want to learn how to trade real estate?
Now, trading real estate property doesn’t always entail buying and selling land or commercial buildings. Real estate trading can involve speculating on the price movements of shares and ETFs belonging to Real Estate Investment Trusts (REITs).
REIT assets have high liquidity, and their prices are relatively volatile, creating a good market with the potential for high returns. You can diversify your portfolio and also capitalize on the correlation between interest rates, exchange rates, and economic performance.
Not all FX platforms allow traders to trade real estate online. Consider using Olymp Trade since it provides REIT markets.
Start Trading Property Real Estate with Olymp Trade
As with any new market, it’s paramount to use the risk-free demo account for experiments and strategy development.
On Olymp Trade, navigate to the Assets list, and under ETFs, select ETF U.S. Real Estate. Its price chart will come into view. Various technical indicators and plotting tools can be applied to identify patterns.
Olymp Trade also avails additional tools and trading resources. Select the More Info icon next to the asset name to access trading property real estate insights and recommendations from expert analysts.
How to Trade Real Estate Properties – Background on REITs
Before 1960, only large companies and well-financed investors could invest and make profits from commercial real estate ventures. Congress introduced Real Estate Investment Trusts (REITs) to extend investment opportunities to ordinary people who began funding income-producing properties by purchasing their shares and receiving dividends payouts.
So, a real estate investment trust is a public-traded company that owns income-producing real estate. American Tower, the largest global REIT with a market cap of $102.3 billion, operates more than 181,000 communication sites that are leased to generate income. As mandated by law, REITs must distribute not less than 90% of their annual taxable income as dividends.
Non-Traded Real Estate
A non-traded real estate refers to a public or private REIT that’s not listed on any security exchange, making its shares unavailable for public trading. Only accredited investors partake in non-traded REITs. Eventually, the non-traded REITs are liquidated or publicly listed.
Publicly Traded Real Estate
Publicly traded real estate are REITs that are bought and sold on exchanges. Individual investors may access these financial markets with the help of brokers. They can buy low and sell high to derive profits or hold onto the REITs for dividend payouts.
Publicly traded REITs must adhere to rigorous standards. Like shares, REITs represent real ownership in the underlying asset, and they are easier to liquidate than physical properties, making them attractive to investors. About 145 million Americans own REIT stocks, mainly through tax-deferred retirement accounts (50.5%). Only 15.2% of people hold direct stocks, and the remaining ownership is in managed assets and investment funds, for instance, ETFs and mutual funds.
So, is real estate a trade commodity? No, because it’s fixed geographically and can’t be traded. REIT shares, however, can be traded and change hands with relative ease.
Investing in REITs vs Trading REITs
A real estate trader may invest in REITs by buying REIT shares, options, or ETFs. Unlike purchasing individual stocks, ETFs allow investors to purchase a basket of REIT shares from different organizations.
Non-US citizens looking for direct investment opportunities may need to navigate extra steps, for instance, the complex international taxation rules or finding a brokerage company that accepts international investors. The whole process may be challenging.
Olymp Trade has addressed these issues by allowing traders to participate in the US real estate market by speculating on the price movements of REITs through Contracts for Differences (CFDs). Traders can generate profits by successfully predicting the price direction (up or down). With leverage, traders may multiply their profits (but note that leverage also multiplies risk). Trading CFDs doesn’t require ownership in the underlying assets, making it less complicated.
Don’t have experience with CFDs? Learn more about what the Forex is from our previous post.
Factors That Influence the U.S Real Estate ETFs Price Movement
As you learn how to trade real estate properties as REITs, it’s essential to know the factors that may drive the price movement of real estate assets.
The U.S. Real Estate ETFs market on Olymp Trade reflects the performance of REITs from about 110 organizations, drawn from all real estate segments, including industrial, commercial, and residential.
From past research, it’s been noted that REITs are sensitive to increases in interest rates during periods of high economic growth. Falling interest rates don’t necessarily impact REITs negatively as projects become cheaper to finance.
Poor economic outlooks may hurt REIT prices, for instance, there was a dip in prices in March 2020 as real estate companies struggled to collect rent. Over the long run, REITs eventually recover from periods of economic recession.
Traders must also pay particular attention to news releases of housing data, construction spending figures, seller and buyer statistics.