What Is a Real Estate Investment Trust (REIT)? A real estate investment trust (REIT) is a company that owns, operates, or finances income-generating real estate. Modeled after mutual funds, REITs pool the capital of numerous investors. This makes it possible for individual investors to earn dividends from real estate investments—without having to buy, manage, or finance any properties themselves.
How REITs Work Congress established REITs in 1960 as an amendment to the Cigar Excise Tax Extension. The provision allows investors to buy shares in commercial real estate portfolios—something that was previously available only to wealthy individuals and through large financial intermediaries.
Properties in a REIT portfolio may include apartment complexes, data centers, healthcare facilities, hotels, infrastructure—in the form of fiber cables, cell towers, and energy pipelines—office buildings, retail centers, self-storage, timberland, and warehouses.
In general, REITs specialize in a specific real estate sector. However, diversified and specialty REITs may hold different types of properties in their portfolios, such as a REIT that consists of both office and retail properties.
Many REITs are publicly traded on major securities exchanges, and investors can buy and sell them like stocks throughout the trading session. These REITs typically trade under substantial volume and are considered very liquid instruments.
A real estate investment trust (REIT) is a company that owns, operates, or finances income-producing properties. REITs generate a steady income stream for investors but offer little in the way of capital appreciation. Most REITs are publicly traded like stocks, which makes them highly liquid (unlike physical real estate investments). REITs invest in most real estate property types, including apartment buildings, cell towers, data centers, hotels, medical facilities, offices, retail centers, and warehouses.
Investing in real estate is a great way to boost your income. Whether it’s a commercial real estate or residential, you can always rent out your space to receive a steady monthly income in the form of rent checks.
If the real estate you own appreciates in value over time, you can sell it for a good profit. Al though appreciation isn’t always guaranteed. You’ll need to invest in the right property to get those big returns.
Adding real estate to your investment list generally boosts diversification, which can give protection in times of economic crisis. If certain stocks are suffering because of an economic downturn then investment in real estate properties in your portfolio might still be increasing in value, protecting you from the losses your other investments are taking.
Real estate investments are considered protection against inflation. When the prices of goods and services rises,home values and rents typically increase, too. Investment in real estate properties can help in increasing monthly income and appreciation to help protect you financially when the costs of every other commodity is going up, too.
The big goal of real estate investing is to increase the cash flow, also known as building capital. Selling a property with a good appreciation boosts the overall capital. The focus, of course, is to invest in the right properties that will have a good chance of appreciation in the future.
Owning a real estate property comes with other benefits that aren’t financial. When you own a property, you are your own boss, which is fulfilling to many buyers and investors. People can make a difference in their community by providing homes for renters or bringing businesses to commercial properties that will provide much-needed services to their communities.