Finance and Market Analysis - Essay Example

When a REIT agency registers to venture into specific areas, there is an aspect of additional market cover. REIT can thus conduct a number of projects which essentially maximize its potential. This is the broader picture that implies additional return on investment and maximizes the proportions of dividends that the shareholders gain in the REIT investment. This is not usually the practical case of REITs business that is restricted to a specific line of real estate development. If REITs companies have specifications to operate in restricted lines of business, they cannot, later on, expand to more openings and business opportunities. From a diversified perspective, however, REITs have to enjoy a dynamic market characterized by a wide range of business opportunities than maintenance of an ordinary real estate portfolio.

Dynamism and Innovations
Secondly, diversification has in the past enabled RETs to introduce and practice innovative ideas in the real estate properties without the risks of exceeding the limits of operation as stated in the description of the real estate portfolio. A diversified approach provides friendly platforms for real estate to keep pace with the contemporary competitive property market dynamics.
Market Flexibility
The third and perhaps the most important advantage of the diversified approach of keeping a real estate business portfolio is that it offers flexible opportunities suitable for long-term investment planning. It thus enables REIs to operate long-term renewable contracts with the lease clients without necessarily forcing them into a dedicated agreement. This approach provides opportunities to enable the REITs to practice real estate swaps which enable upcoming potential real estate investors to get sufficient exposure to real estate property business without necessarily fulfilling the huge amounts of capital commitment. In the swap, REITs enjoy unlimited exposure to real estate and have the ability to change their capital equity and bonds without restrictions or regulations. This means that REITs sources of revenue will then not be limited to interests, but also bonds, equity, and commodities. With the inclusion of international diversification in Real Estate, there is a low correlation with interest rates than with bonds and equities.