Invest in Real Estate with a REIT

by Maurice Kennedy, ® Realtor 11/14/2021

A real estate investment trust (REIT) can be an attractive way to invest in real estate. It allows anyone to invest in real estate assets arranged in a portfolio.

What is a REIT? 

A REIT is a company that operates, finances and/or owns real estate that produces income. It provides its investors with the opportunity to own real estate so they can access an income that is dividend-based. Investors in REITs also have a hand in enhancing communities by helping them grow and thrive. 

How a REIT Works

Besides the fact that REITs are much like any other type of stock, they also follow a methodical business model. The company leases space while collecting rent on the real estate it owns. The income generated by these actions is paid to shareholders.

In order to meet the qualifications for being a REIT, the company is required to pay out at least 90 percent of its taxable income to its shareholders. Most times, REITs pay out a full 100 percent. Shareholders are still required to pay income tax on their dividends. 

In contrast, mREITs (mortgage real estate investment trusts) don’t own any real estate directly. They earn an income on the interest generated when they finance investments. 

Properties REITs Invest In

The real estate properties that a REIT can invest in spans a range of options. These are categorized into 13 different sectors and include residential, retail, healthcare, timberland and more. While most REITs invest in a single sector, there are those that hold more than one type of property. 

Types of REITs

There are four general types of REITs. The most common are equity REITs. These operate and/or own real estate that generates income. mREITs focus on providing financing for real estate by originating or purchasing mortgage-related products. 

Public non-listed REITs are registered with the SEC, but don’t trade on the stock exchanges like the two previous types of REITs mentioned. Private REITs also do not trade on the stock exchanges. In addition, they are exempt from having to register with the SEC. 

Getting Started Investing in REITs

Investing in REITs is as easy as purchasing shares of a company that’s listed on a stock exchange. Other options for investing in a REIT include buying shares in an exchange-traded fund or a mutual fund that focuses on REITs. Investors also have the option to invest in private REITs and REITs that are public but not listed on the stock exchanges. 

REITs have historically outperformed several United States benchmarks, but it’s important to speak with an investment advisor or financial planner who can provide guidance and targeted information specific to your location and goals.

About the Author
Author

Maurice Kennedy, ® Realtor

Please explore the resources within my website, you will find everything you need to buy or sell a home as well as learn about the market value of homes. You can search for homes with detailed descriptions, photos, community and school information and so much more. I am ready to assist you with all of your real estate needs. My approach is customized for each client; my solutions are never one-size-fits-all! Please view this website as an introduction of my services and capabilities in this local area. Give me a call or send an email when you are ready to visit some homes or to schedule a free home buying or selling consultation. I look forward to working with you!