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John Naronha

What is a Real Estate Investment Trust and how to invest in them?

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Real Estate Investment Trusts (REIT’s) are companies that own, operate or finance income-producing real estate. They function just like a Mutual fund where the money collected from various investors is combined into a portfolio of income-generating real estate assets such as shopping malls, offices, hotels, data centers, apartment complexes, serviced apartments, and warehouses. The REIT’s investment goal is to create income distribution and long-term appreciation potential.

The business model of a REIT is very straightforward. They lease out space, collect rent from tenants and distribute the income generate to the shareholders in the form of dividends. The percentage of income paid to shareholders depends on the country from where they operate, but generally, REIT’s are required to pay a significant portion of their taxable income to shareholders.

REIT’s have to meet many regulatory requirements to qualify, and a large number of them are publicly traded entities. In the United States alone, REIT’s are estimated to own gross assets over $3 trillion with a majority of them are listed on stock exchanges. According to REIT investment research firm, Nareit, the combined market cap of the listed real estate trusts in the US is projected to be more than a trillion dollars with millions of Americans investing in these funds through the 401 (k) route.

Although the US is the largest market for listed real-estate companies, the global appeal for REIT’s is gathering momentum at a rapid pace with about forty countries operating their own REIT’s.

As an investor, you can invest in the publicly traded REIT’s in a similar way to some of the other asset classes like equities, commodities and fixed income instruments like Government securities. Besides, exchange-traded (ETF) and mutual funds provide an efficient route for investors to include well-established, globally listed real estate companies in their portfolio. On the other hand, if you are looking to invest in a non-traded REIT, get in touch with a broker or a financial advisor participating in the REIT’s offering.

Based on the Internal Revenue Service data, there are around 1,100 REIT’s in the US who have filed tax returns with more than 225 registered with the SEC and trade on US exchanges. As an investor looking to invest in a REIT, evaluate all the key investment criteria, primarily the risk, before choosing your REIT investment.

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On 12/8/2020 at 1:17 PM, Ella Tucker said:

It's like when you invest in real estate.

It is really very difficult to manage real estate. As I said, you need to know the little things, and most importantly, know all the laws. I had my own property, I rented out the house. I was young and didn't know anything about business... In general, I got into a left-wing company, where I was thrown for money. I signed a document stating that when the house was sold, 65% went to this company. But I did not despair and continued to work. A little later, I opened my hotel, and we signed all the agreements and papers with this company https://thepropertysourcingcompany.co.uk/below-market-value-property , which just helped me find this hotel for my business.

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