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Investor’s Guide to Real Estate Investment Trusts (REITs)

Real Estate Investment Trusts

REITs: What Are They?

A real estate investment trust, or REIT, is a company that invests in real estate and operates as a real estate investment trust. REITs can be publicly traded, privately held, or a combination of both.

The REIT’s assets are typically held in the form of real estate property and are managed by a professional management team. In exchange for this management, the REIT receives a management fee and a portion of the income generated by the property.

As an investor, you can buy shares of a REIT through your broker or directly from the REIT itself.

How do REITs operate?

Real estate investment trusts are required to pay out at least 90% of their taxable income to shareholders in the form of dividends. That means you can enjoy a high-yielding passive income stream from real estate investments.

However, it is important to note that REITs are not guaranteed to pay a dividend. 

Types of REITs

There are three types of REITs:

Equity REITs

Equity REITs own and operate income-producing real estates, such as apartment buildings and office buildings.

Mortgage REITs

The main reason for this is that mortgage REITs are required to pay interest on the mortgage-backed securities they own. Mortgage REITs are not required to pay out any dividends.

Hybrid REITs

A REIT using both equity and mortgage strategies can be classified as a hybrid REIT.

How to Invest in Real estate investment?

There are so many ways that you can invest in real estate. Real estate has consistently had a great run over the past few years and looks like there will be more potential in the future. The best way to invest in the real estate markets is to look at the options available and choose what suits you best. While there are so many different ways that you can choose when it comes to picking the right real estate investment option for you, you must do enough research to choose the right one.

Pros and Cons of Investing in REITs

There are many pros and cons of investing in REITs, and they are worth considering before you jump into the market. Here are a few things to consider before you decide to invest in a REIT:


This is a great way to get a steady stream of income from your investment. REITs have a low correlation with the stock market, making them a great way to diversify your portfolio.

REITs offer a great way to invest in real estate without the hassle of buying and managing properties.


The biggest disadvantage of investing in REITs is that they’re not as liquid as other investments. You can’t sell your shares as quickly as you can sell stocks, and you’ll pay a premium to buy and sell them.

If you want to buy a REIT, you have to open a brokerage account that allows you to trade REITs. If you want to sell them, you have to sell them through a brokerage account that allows you to sell them.

Benefits Of Investing In REITs

1. The capital appreciation

The returns on real estate investments are much higher than any other investment. The reason for this is that the value of the real estate is directly linked to the economic growth of a country.

2. Diversification of risk

The real estate market is very different from the stock market. Real estate investment trusts offer a high degree of diversification as they invest in many different types of real estate.

3. Tax benefits

The returns on real estate are not subject to capital gains tax.

4. Professional management

Real estate investment trusts are professionally managed.

5. Low correlation to the stock market

The returns on real estate investment trusts are not correlated to the returns on the stock market.

6. Low volatility

The volatility of real estate investment trusts is much lower than that of the stock market.

Real Estate Investment Fraud

Real estate investment fraud is a type of investment fraud that occurs when a person is persuaded to invest in a property that does not exist or is misrepresented as to its value or condition.

Real estate investment fraud can take several forms. In one form, the fraudster convinces the investor to invest in a property that does exist but is in a dilapidated condition. In another form, the fraudster convinces investors to invest in a property that does exist but is in a condition that is much better than the actual condition.

Real estate investment fraud is not a new phenomenon. The first recorded case of real estate investment fraud occurred in the year 1690.

What is the difference between a REIT and a real estate company?

REITs and real estate companies are similar in that they both own and operate real estate, but they are also different. REITs are companies that have a legal structure that allows them to distribute a high percentage of their income to shareholders.

Real estate companies, on the other hand, are companies that own and operate real estate but do not have the legal structure to distribute income to shareholders.

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