They Operate as a Corporation
Real estate investment trusts (REITs) are a form of mutual funds and were first created in the 1960s. REITS are often corporations complete with a board of directors, stockholders and shares. They earn income, pay taxes and pay dividends to shareholders.
They usually own and operate property and create income from sales, rent or mortgages. REITs, like traditional stocks and bonds and other income-generating investments, are usually meant to produce passive income for shareholders and investors.
REITs Allow Earned Income
Investors and shareholders who invest in REITs earn income from what would traditionally be considered an expense. Homeowners spend plenty of money on homes either through rent or mortgage, insurance payments and taxes. Through REITs, individuals can earn additional income through a diverse investment portfolio.
REITS Rise and Fall with the Market
Real estate used to be seen as a safe investment, with a good chance of continuing income and great opportunities for growth for both the company and the investor. However, the housing bubble of 2008 changed that view. As with any investment, it pays to be cautious and research before buying in.
REITs Own Income-Producing Real Estate
REITs usually manage or own commercial or income-producing real estate properties. REITs often have a diverse portfolio to show that includes commercial properties for rent, apartment complexes or condominiums, hotels, hospitals and more. REITs create income through a variety of ways, which include collecting rent, leasing out properties through long-term contracts or property mortgage. Because they answer to shareholders and must pay dividends, REITs must produce profit for their stockholders.
REITs Exist All Over the World
The REIT structure is not just found in the United States, but all over North America, Europe and Asia. However, REITs may differ in structure and type throughout the world, depending on the country’s investment laws and practices. However, REIT end goals are often the same in every country. Through REITs, global real estate investment is also possible.
REITS Fall Under Two Categories
REITs fall under two categories: equity REITS and mortgage REITs. Equity REITs often own and manage properties under their own portfolio, unlike mortgage REITs which may develop or lend money primarily to property owners. Equity REITs fall under traditional real estate land ownership.
They primarily attend to renting and developing real estate property, which also includes improvements, tenant services and more. Knowing the differences can help you decide where to invest. Mortgage REITs operate more like traditional hedge funds and often engage in the same tactics.
REIT Capital Allows for Better Property Improvements
REITs provide secure investments and a larger capital base for general improvements to residential and commercial properties. These include repairs and renovation, maintenance, landscaping, tree pruning and full service care for garden and pool areas. REIT capital also provides a buffer for rent. Well-managed REITs usually post rent rates below market value and consistently maintain their portfolio. If you’re thinking of investment, you may want to take the time to visit sites that your chosen REIT company is known to manage.
It’s Easy to Invest
Browse the stock exchange for a list of publicly traded REIT companies. Individuals can purchase shares through a securities dealer as stocks or debt security. Alternatively, a financial planner can assist you with a prospective company.