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Real Estate Investment Trusts for Beginners

Do you like the idea of investing in real estate? Are you looking for ways to diversify your investment portfolio? If you answered yes to either or both question/s, REITs could be for you. Read on to learn more.

What is a REIT?

REIT stands for Real Estate Investment Trust, and is a company that owns, and generally operates, real estate property. According to federal regulations, a company must distribute at least 90% of its annual income to shareholders in order to be considered an REIT.

What type of properties do REITs invest in?

REITs can invest in any number of real estate properties including shopping malls, office buildings, warehouses, apartment complexes and healthcare facilities. Typically an REIT will specialize in a particular type of real estate, and some even specialize in particular areas of the country.

How do REITs generate profit?

Different types of REITs generate profit in different ways. Equity REITs generate profit through the operation of income-producing properties. This includes leasing and property development. Mortgage REITs generate profit by extending mortgage loans to real estate owners and operators. Still a third type of REIT, known as a hybrid REIT, generates profit through a combination of property ownership and loans.

How do you go about investing in a REIT?

Investing in an REIT is a fairly simple process. You can either purchase stock in a publicly traded REIT through a stockbroker or purchase shares in a mutual fund that focuses on real estate securities.

Why should you considering investing in a REIT?

REITs typically offer shareholders high dividend yields, steady growth, professional management and a simple, low-risk means of adding real estate to an investment portfolio. Plus, since REITs are easily bought or sold on the stock exchange they are an investment that can be liquefied quickly—a real asset, indeed.

 


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