No mortgage, no problem... REITs deliver

I'll be honest... owning an investment property feels almost impossible right now. Between soaring prices, climbing interest rates, and strict lending rules, it can seem like the door has been slammed shut. 

But this doesn't mean I have to sit out of the property game altogether. Real Estate Investment Trusts (REITs) might be the workaround - letting you buy into some seriously high-quality, income-generating properties without the price tag of bricks and mortar. 

Curious about how that works in practice, I reached out to Andrew Parsons, Chief Investment Officer at Resolution Capital, to find out where younger investors like myself can still get a slice of the property market without the hefty price tag. 

Parsons has over 30 years of experience in global financial and property markets and was able to provide valuable insights. 

“Global REITs provide investors with exposure to the underlying returns of some of the world’s best property. It’s property very few investors can access directly, and the opportunity set is large”.

Why REITs make sense for younger investors

Unlike buying a single apartment or townhouse, REITs allow small parcels of capital to access large-scale property. 

"Outside of apartments, offices and shops, there’s a multitude of property types in the global listed real estate sector offering different income and return profiles and providing significant portfolio diversification benefits."

REITs are also liquid - they trade on exchanges like shares, making it easy to buy or sell without the long timelines and transaction costs of direct property. Importantly, REIT earnings have proven to be far more stable than broader equities, even during volatile periods like COVID-19. 

Key risks to keep in mind

However, REITs, like many investment vehicles, are not risk-free. Parsons cautions:

"Rising cost of debt can impact REIT earnings which can compress valuations, especially in listed markets where repricing is immediate."

Interest rate cycles, leverage, and liquidity are central considerations. The good news? Balance sheets are in good shape, Parson explains. 

"Balance sheets are strong: leverage is historically low (~30% net leverage vs. ~53% in 2010) and debt maturities are well-laddered."

This means most quality REITs are well-positioned to navigate a shifting rate environment. 

Is the property slump behind us? What the numbers say

Not long ago, the mood around commercial property was bleak - headlines warned of falling prices and nervous landlords. But lately, the tone has shifted. After months of watching values slide, many fund managers are starting to whisper that the worst might be behind us. 

Parsons shares that optimism. 

"Yes, we are seeing evidence that commercial real estate valuations have bottomed... REITs are trading at discounts to NAV, supported by strong balance sheets, tight supply, and rising earnings." 

In other words, while sentiment still lags, the numbers are starting to tell a more hopeful story. 

Rising construction costs, up 30-40% in just five years, add another layer to this picture. New projects have become uneconomical, which means existing, high-quality assets are now harder to replace. For investors, that scarcity could translate into pricing power and more resilient returns as the cycle turns. 

Sectors showing strength: healthcare, retail and data centres

Younger investors often associate REITs with shopping malls or office towers, but today's opportunities span healthcare, logistics, and the digital economy. Parsons highlights three standout areas: healthcare, retail, and the digital economy. 

Healthcare REITs, particularly seniors housing in the U.S., stand out. Parsons explains, "U.S. healthcare has been a standout, specifically U.S. seniors housing exposures, which are benefiting from the ageing of the ‘baby boomer’ demographic and very low supply levels."

Resolution Capital's top holding, Welltower (NYSE: WELL), just posted an impressive 13.8% year-over-year growth in same-store income. And with America's 80-plus population set to double over the next quarter century, the demand story writes itself.

Then there's retail, a sector many had written off post-COVID. Yet it's staging a comeback. "Retailers are beginning to realise that both an online presence and physical store is the best way to maximise sales," Parons said.

"The retail sector has faced scepticism, particularly in the U.S., due to tariff concerns. However, what’s often overlooked is the lack of new retail construction since the GFC." Australian investors will recognise Scentre Group (ASX: SCG), which has benefitted from this scarcity. 

Shopping centre occupancy is back near record highs, and rents reset during the pandemic are now growing from a healthier base.

Finally, the digital backbone of our lives - data centres. Parsons described the space as "presently supply-constrained," with opportunities tied to the surge in digitalisation and AI. 

Their portfolio taps into this megatrend through specialist platforms like Equinix (NASDAQ: EQIX) and Digital Realty (NYSE: DLR) - proof that the future of property isn't always made of bricks and mortar. 

Building a diversified REIT portfolio

So, how should investors build their own REIT portfolio? I used to think building a REIT portfolio could be as simple as picking a handful of names and calling it a day. But when I asked Parsons about it, he was quick to caution me against oversimplifying. Five REITs, he said, just won't cut it.

"The portfolio for Resolution Capital Global Property Securities Fund – Active ETF (ASX: RCAP) is a very select portfolio of currently 45 securities which we believe gives investors exposures to some of the world’s highest quality real estate."

For most, the lesson is clear—spread your bets. Mix sectors like healthcare, retail, data centres, and logistics to balance income and growth. And if researching dozens of companies isn’t realistic, diversified ETFs offer a professionally managed, globally diversified way to stay in the property game without hand-picking every winner.

Staying in the game without the mortgage stress

Buying REITs (or if you don’t want to do the individual stock research yourself, an actively-managed REIT ETF like ASX: RCAP, offers a way in - a chance to share in the earnings of some of the world's most valuable properties without the crushing debt or risk of putting everything into a single address. 

Parsons summed it up best:

"Despite pockets of pressure, the sector is well-positioned to navigate a changing interest rate environment."

The message is clear - while the headlines may still sound cautious, the fundamentals of quality real estate remain solid. 

With a thoughtful mix of sectors and a long-term mindset, REITs can provide steady income, global exposure, and growth potential. For younger investors, they're not just a backup plan - they're a legitimate path to staying connected to an asset class that has built fortunes for generations. 

ETF

Resolution Capital Global Property Securities Fund – Active ETF (RCAP)

Global Property

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