When people think of investing they think think it's a choice between shares or property. That isn't exactly true. You can buy shares of property groups on the ASX called real estate investment trusts (REITs).
REITs are a great way to get exposure to property as well as getting good capital growth and income.
There are many different types of REIT. There is one based on owning farmland called Rural Funds Group (ASX: RFF). There is another that owns all the Westfields in Australia and New Zealand called Scentre Group (ASX: SCG).
But those two aren't the ones I want to tell you about today. Here are three REITs that I think could make a better investment than residential property:
Generation Healthcare REIT (ASX: GHC)
Generation Healthcare's focus is owning and leasing purely healthcare buildings. Healthcare is a growing, defensive industry so it makes sense to focus on finding tenants that are from this industry.
It has a variety of different healthcare buildings such as hospitals, aged care centres and medical clinics. It's good to have this diversification because that allows it to have a wider scope to find good investments. It also doesn't expose the REIT to too much risk from any type of healthcare building.
The Generation Healthcare share price has grown by 136% over the last 5 years to $1.94 and it currently has a dividend yield of 4.58%.
BWP Trust (ASX: BWP)
BWP Trust (BWP) is an owner of many large sheds in prime locations. Most of those sheds are leased to Bunnings, the strong home improvement business owned by Wesfarmers Ltd (ASX: WES).
Having one of Australia's best retail businesses as your tenant is a good strategy and gives BWP a better chance to charge higher rent.
BWP shares have grown by 57.4% over the last 5 years to $2.85 and it currently has a dividend yield of 6.01%.
Arena REIT No 1 (ASX: ARF)
Arena is a fast-growing REIT that mostly owns childcare centres but also owns a few healthcare buildings too.
Both healthcare and childcare are growing sectors and a good place for Arena to focus on. In its latest results Arena revealed a 11% increase to the operating earnings per share and a 9% increase to its dividend. This is a strong result for a REIT.
Arena shares have grown by 101% over the last five years to $2.11 and it currently has a dividend yield of 5.4%.
Foolish takeaway
I like all three of these REITs, but I prefer Generation Healthcare and Arena for the sectors they operate in. All three REITs have a good chance of beating residential property's capital growth and have the added bonus of strong dividend yields. If property stocks aren't your thing and you want an even bigger dividend yield, you should check out this great stock instead.
