Investing in Real Estate Investment Trusts (REITs): What You Need to Know

Real estate investment trusts (REITs) are companies that own or finance real estate that generates income in a variety of real estate sectors. These companies must meet certain requirements to qualify as REITs. REITs are listed on major stock exchanges and offer a range of benefits to investors. You can invest in a publicly traded REIT by buying shares through a broker, or you can buy shares of an untraded REIT through a broker that participates in the offering.

You can also buy shares in a REIT mutual fund or a publicly traded fund REIT.A REIT is an easy way to add real estate to your portfolio, giving you diversification and access to historically high REIT dividend payments. Congress created REITs in 1960 to provide all investors, especially small investors, access to revenue-generating commercial real estate. REITs combine the best features of real estate and equity investment.REITs own many types of commercial real estate, including office buildings and apartments, warehouses, hospitals, shopping malls, hotels, and commercial forests. Some REITs are dedicated to financing real estate.

The REIT scheme will provide unit holders with stable cash inflows from revenue-generating real estate properties. Most countries' REIT laws entitle a real estate company to pay less in corporate taxes and capital gains taxes.Because they typically pay high dividends, REITs can provide income to investors looking for cash flow and offer an opportunity for investors who want to participate in large-scale real estate investments without the hassle of individual purchases. An increase in demand for health services (which should happen with an aging population) is good for health real estate. With the exception of The Link and Regal Real Estate Investment Trust, share prices of all but one are significantly below the initial public offering (IPO) price.MREITs (or mortgage REITs) do not own real estate directly, but rather finance real estate and derive income from interest on these investments.

Not too many people have the ability to go out and buy a commercial property to generate passive income. Depending on the category of real estate in which a REIT is invested, investments can undergo major changes due to economic sensitivity.In a poor economy, retail REITs with significant cash positions will have opportunities to buy good real estate at difficult prices. REITs provide an investment opportunity that makes it possible for everyday Americans, not just Wall Street, banks and hedge funds, to benefit from valuable real estate, present the opportunity to access dividend-based income and total return, and help communities to grow, prosper and revitalize. That means positioning your properties to attract renters and earn rental income, and managing your property portfolios and buying and selling assets to generate value throughout long-term real estate cycles.

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