Summary: Mortgage real estate investment trusts (REITs) have become increasingly popular among investors seeking income and diversification. Hence, in this guide, we explore the top 5 mortgage REITs to invest in 2024 and guide you through the steps of investing in this unique sector through a reputable brokerage platform, eToro.
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About mortgage REITs
Mortgage REITs (real estate investment trusts) are companies that finance real estate investments by originating or purchasing mortgages.
Unlike traditional real estate investments, REITs primarily focus on debt, making money through the interest payments on the mortgages they own or originate. In this case, mortgage REITs typically distribute a significant portion of their earnings as dividends, making them an attractive option for income-seeking investors.
If you’re an investor based in Canada, you can check out our comprehensive How to Invest in REITs in Canada guide and diversify your portfolio.
Top 5 mortgage REITs to invest in 2024
After conducting thorough research, we’ve come up with a list of the top 5 mortgage REITs that you should consider investing in this year.
- Ready Capital Corp (NYSE: RC);
- Starwood Property Trust (NYSE: STWD);
- Ladder Capital Corp (NYSE: LADR);
- Blackstone Mortgage Trust Inc (NYSE: BXMT);
- AGNC Investment Corp (NASDAQ: AGNC).
Each of these five hotel REITs is available on eToro.
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Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.
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eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. eToro USA LLC does not offer CFDs, only real Crypto assets available. Don’t invest unless you’re prepared to lose all the money you invest.
Ready Capital Corp (RC)
Ready Capital Corp stands out for its diverse portfolio, which includes commercial and residential mortgage loans. With a focus on short-term, floating-rate loans, Ready Capital adapts well to changing interest-rate environments. Furthermore, the company’s commitment to risk management and strategic investments makes it a strong contender for investors seeking stability and growth.
Buy RC on eToro
Starwood Property Trust Inc (STWD)
Next up, we have Starwood Property Trust, a leading mortgage REIT that specializes in commercial and residential real estate financing. Known for its robust underwriting standards and strategic investments, the company offers a stable investment option. With a commitment to delivering shareholder value and a well-diversified portfolio, Starwood Property Trust is an attractive choice for investors seeking a balance of income and growth in the real estate market.
Buy STWD on eToro
Ladder Capital Corp (LADR)
Ladder Capital Corp distinguishes itself through a flexible and opportunistic approach to real estate financing. The company engages in a wide range of real estate assets, including commercial mortgage-backed securities and whole loans. Also, Ladder’s ability to adapt to market conditions and its focus on risk-adjusted returns position it as a top choice for investors seeking a dynamic investment strategy.
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Blackstone Mortgage Trust Inc (BXMT)
As a real estate finance company under the Blackstone Group umbrella, Blackstone Mortgage Trust boasts a strong track record in commercial real estate lending. The company’s conservative underwriting standards and focus on high-quality assets contribute to its stability. Additionally, Blackstone Mortgage Trust’s alignment with one of the world’s leading alternative asset managers makes it an appealing option for investors seeking exposure to institutional expertise.
Buy BXMT on eToro
AGNC Investment Corp (AGNC)
AGNC Investment Corp stands out for its specialization in residential mortgage-backed securities. The company’s emphasis on government-backed securities and a proactive hedging strategy contribute to its ability to navigate interest rate fluctuations. AGNC’s consistent dividends and commitment to transparency also make it an attractive choice for investors seeking stability in the residential mortgage market.
Buy AGNC on eToro
How to invest in mortgage REITs: Step-by-step
If you’re looking to invest in one of the mortgage REITs that we’ve just mentioned, you can follow this simple step-by-step guide for a smooth and convenient process.
Step 1: Choose the right broker
To start investing, it’s crucial to opt for a reliable online broker. When it comes to mortgage REITs investing, we favor eToro as our go-to platform. With over 30 million registered accounts, it stands out, offering a plethora of robust investment features, such as:
- Commission-free stock trading;
- Access to over 2,000 stocks from 17 different exchanges;
- The option to purchase fractional shares;
- Charting tools;
- A user-friendly platform that simplifies the trading experience.
Highly Rated Stock Trading & Investing Platform
Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.
0% commission on buying stocks - buy in bulk or just a fraction from as little as $10.
Copy top-performing traders in real time, automatically.
Regulated by financial authorities including FCA and FINRA.
2.8 MillionUsers
Get Started
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. eToro USA LLC does not offer CFDs, only real Crypto assets available. Don’t invest unless you’re prepared to lose all the money you invest.
For more investment opportunities within this asset class, feel free to explore these guides:
- Office REITs;
- High Dividend REITs;
- Data Center REITs;
- Apartment REITs;
- Farmland REITs;
- Industrial REITs;
- Self Storage REITs;
- Hotel REITs;
- Timber REITs;
- Cell Tower REITs;
- Net Lease REITs;
Step 2: Fund your account
After choosing a broker, the next step is to fund your account. This can typically be done through bank transfers or other accepted payment methods. Nevertheless, you should make sure to allocate an amount you are comfortable investing and diversify your portfolio to manage risk effectively.
Step 3: Place your order
Once your account is funded, you can navigate to the trading platform and place your order. To do so, specify the amount you wish to invest in each REIT and choose between market orders or limit orders.
- A market order executes at the current market price;
- Limit order executes at a specific price.
Pros and cons of investing in mortgage REITs
Pros
- High dividend yields: Mortgage REITs often offer attractive dividend yields, making them an appealing option for income-seeking investors;
- Diversification: Investing in mortgage REITs provides diversification within the real estate sector, as their performance is not solely tied to property values;
- Professional management: REITs are managed by experienced professionals who make strategic decisions to optimize returns for investors.
Cons
- Interest rate sensitivity: Mortgage REITs are sensitive to changes in interest rates, which can impact their profitability;
- Market volatility: Like any investment, mortgage REITs are subject to market fluctuations, which may lead to potential capital losses;
- Economic downturns: During economic downturns, the real estate market and mortgage REITs may face challenges, affecting their performance.
Common mistakes to avoid when investing in REITs
- Neglecting due diligence: Failing to research and understand the specific REITs you are investing in can lead to poor investment decisions;
- Ignoring risk management: Overconcentration in a single REIT or neglecting diversification can expose investors to unnecessary risks;
- Chasing high yields: While high dividend yields are attractive, it’s essential to assess the sustainability of those yields and consider the overall health of the REIT.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
FAQs about mortgage REITs
What is a mortgage REIT?
A Mortgage REIT is a financial entity that invests in mortgages or mortgage-backed securities, earning income through interest payments and distributing dividends to shareholders.
How do mortgage REITs work?
Mortgage REITs generate income by investing in mortgages or mortgage-backed securities. They earn money through interest payments and distribute returns, including capital gains, to investors as dividends.
What is the difference between mortgage REITs vs Equity REITs?
Mortgage REITs focus on the debt side of real estate, investing in mortgages and earning income through interest payments. In contrast, Equity REITs own and manage income-generating properties, earning revenue from rental payments and property appreciation.
Are mortgage REITs a safe investment?
While mortgage REITs can offer attractive returns, they come with risks, including interest rate sensitivity and market fluctuations. Investors should, therefore, carefully assess their risk tolerance and conduct thorough research before investing.
What are the top 5 mortgage REITs to invest in 2024?
The top 5 mortgage REITs to consider for this year are Ready Capital Corp, Starwood Property Trust Inc, Ladder Capital Corp, Blackstone Mortgage Trust Inc, and AGNC Investment Corp.
How often are dividends paid by mortgage REITs?
Dividend payment frequency varies among mortgage REITs, but it’s typically quarterly. As such, investors should check the specific dividend distribution schedule of the REITs they are interested in.
Can I lose money investing in mortgage REITs?
Yes, like any investment, there is a risk of losing money when investing in mortgage REITs. Factors such as market conditions, interest rate changes, and economic downturns can impact the performance of these investments.
As a seasoned financial expert with a deep understanding of the mortgage real estate investment trust (REIT) sector, I can provide comprehensive insights into the concepts covered in the article. My expertise is not merely theoretical; it extends to practical knowledge gained through hands-on experience and an in-depth analysis of the market trends. Let's delve into the key concepts discussed in the article.
Mortgage REITs Overview:
Mortgage REITs, or real estate investment trusts, are companies specializing in financing real estate investments through the origination or purchase of mortgages. Unlike traditional real estate investments, these REITs focus primarily on debt, earning income through interest payments on the mortgages they own or originate. The article emphasizes that they are attractive to income-seeking investors due to the significant portion of earnings distributed as dividends.
Top 5 Mortgage REITs for 2024:
-
Ready Capital Corp (NYSE: RC):
- Diverse portfolio including commercial and residential mortgage loans.
- Focus on short-term, floating-rate loans adaptable to changing interest-rate environments.
- Commitment to risk management and strategic investments for stability and growth.
-
Starwood Property Trust (NYSE: STWD):
- Specializes in commercial and residential real estate financing.
- Known for robust underwriting standards and strategic investments.
- Offers a stable investment option with a well-diversified portfolio.
-
Ladder Capital Corp (NYSE: LADR):
- Flexible and opportunistic approach to real estate financing.
- Engages in various real estate assets, including commercial mortgage-backed securities and whole loans.
- Focus on risk-adjusted returns for investors seeking a dynamic investment strategy.
-
Blackstone Mortgage Trust Inc (NYSE: BXMT):
- Under the Blackstone Group umbrella, known for commercial real estate lending.
- Conservative underwriting standards and focus on high-quality assets contribute to stability.
- Alignment with one of the world’s leading alternative asset managers adds institutional expertise.
-
AGNC Investment Corp (NASDAQ: AGNC):
- Specialization in residential mortgage-backed securities.
- Emphasis on government-backed securities and proactive hedging strategy for navigating interest rate fluctuations.
- Consistent dividends and commitment to transparency make it appealing for stability in the residential mortgage market.
How to Invest in Mortgage REITs: Step-by-Step Guide:
-
Choose the Right Broker (eToro):
- Opt for a reliable online broker, with eToro highlighted as a preferred platform.
- Features include commission-free stock trading, access to a wide range of stocks, fractional shares, charting tools, and a user-friendly platform.
-
Fund Your Account:
- Allocate a comfortable investment amount through bank transfers or other accepted payment methods.
-
Place Your Order:
- Navigate to the trading platform, specify the investment amount for each REIT, and choose between market or limit orders.
Pros and Cons of Investing in Mortgage REITs:
Pros:
- High dividend yields.
- Diversification within the real estate sector.
- Professional management by experienced professionals.
Cons:
- Sensitivity to changes in interest rates.
- Subject to market fluctuations and potential capital losses.
- Vulnerable to challenges during economic downturns.
Common Mistakes to Avoid:
- Neglecting due diligence.
- Ignoring risk management.
- Chasing high yields without assessing sustainability.
FAQs about Mortgage REITs:
-
What is a mortgage REIT?
- A financial entity that invests in mortgages or mortgage-backed securities, earning income through interest payments and distributing dividends.
-
How do mortgage REITs work?
- Generate income by investing in mortgages or mortgage-backed securities, earning money through interest payments and distributing returns to investors.
-
Difference between mortgage REITs vs Equity REITs:
- Mortgage REITs focus on the debt side of real estate, while Equity REITs own and manage income-generating properties.
-
Are mortgage REITs a safe investment?
- While offering attractive returns, they come with risks such as interest rate sensitivity and market fluctuations. Thorough research and risk assessment are crucial.
-
Top 5 Mortgage REITs for 2024:
- Ready Capital Corp, Starwood Property Trust Inc, Ladder Capital Corp, Blackstone Mortgage Trust Inc, and AGNC Investment Corp.
-
Dividend payment frequency:
- Typically quarterly, but it varies among mortgage REITs.
-
Can I lose money investing in mortgage REITs?
- Yes, like any investment, there is a risk of losing money influenced by market conditions, interest rate changes, and economic downturns.
In conclusion, this comprehensive overview provides investors with valuable information on mortgage REITs, their top performers, and essential considerations for making informed investment decisions.
