There’s no denying buy-to-let as an asset class has generated a tremendous amount of wealth for investors over the past few decades. However, new regulations, a clampdown on the lucrative tax benefits buy-to-let investors used to receive, and rising house prices have all compressed the sector’s returns.
As a result, buy-to-let property is no longer as attractive as an investment as it once was. Indeed, many publicly-traded real estate investment trust (REITs) now appear to offer a better investment proposition.
Here are two that could be worth adding to your portfolio today.
Tritax Big Box REIT
The market for very large big box logistics assets is booming. Companies active in the sector are reaping the rewards and Tritax Big Box REIT (LSE: BBOX) is one such business.
Tritax’s sole aim is to invest in huge logistics warehouse assets. It’s one of the largest publicly-traded firms active in this sector. Recent trading updates show how the positive trends affecting the market are helping Tritax create wealth for investors.
At the end of 2019, Tritax’s total portfolio was worth an estimated £3.9bn. During the 12 months ended 31 December 2019, the value of the property portfolio increased 1.8% on a like-for-like basis.
The weighted average unexpired lease term across the portfolio at the end of 2019 was 14.1 years. This suggests the company has a visible income stream for the next 14 years. This implies investors can trust the stock’s dividend yield as management knows exactly when its tenants will pay rent.
At the time of writing, the stock supports a dividend yield of 4.9%. On top of this, the company’s active portfolio management will produce capital gains. Tritax’s book value per share has risen by around 10% per annum over the past six years.
Capital growth potential combined with its 4.9% dividend yield suggests the stock could produce a compound annual return of nearly 15% for investors over the long term. That could be enough to turn an initial investment of £20,000 into £1m after 27 years.
Tritax Eurobox (LSE: EBOX) was set up to follow the same business model as Tritax Big Box. So far, the company has only deployed €784.1m of capital, an insignificant figure compared to the overall European logistics market. The market was worth an estimated quarter of a trillion euros in 2016.
This gives the firm tremendous scope to expand across the region and replicate the success Tritax has had in the UK.
The company has only been a publicly-traded entity since 2018. Nevertheless, considering the fact its investment manager is Tritax Management LLP (which also manages Tritax Big Box), it seems sensible to suggest the organisation can achieve attractive income and capital growth for shareholders over the next decade or so.
At the time of writing, the stock supports a dividend yield of 4.7%. This level of income, combined with potential capital growth of 10% or more per annum, implies this business could help you build a sizeable nest egg over the long run.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Tritax Big Box REIT. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.