All You Need To Know About REITs

What are REITS?

Real estate investment trusts are companies that allow the public to invest in large income producing commercial real estate without actually buying it.  Examples include offices, plazas, hotels etc.

How do REITS work?

For example you have three properties on sale so a management team comes and sets up a REIT which will allow the public to buy shares within the (REIT) and the buying of this shares is simply a way of investing in the said properties. As a result you will have a majority stock in the properties while the management team will have a minority stock.

The most common types of REITs include retail REITs (where you invest in shopping malls) residential REITs (large apartments), Office REITs (office buildings),health care reits (hospitals), mortgages reits (mortgages).

Investing in REITs has some benefits. When you invest in REITs your income is secured by long term leases. Secondly, REITs offer a higher dividend since they pay out over 90% of their income back to shareholders. Lastly, REITs also offers professional management when you acquire a large property you may not be able to manage it by yourself therefore reits offers help in terms of managing the property.

The down side of REITs is that there is slow growth. REITs pay out 90% of their income therefore they are left with only 10% to re-invest therefore making their growth slow.

When it comes to real estate investment trust that is all you need to know to make an informed decision on the matter.