What is a REIT (Real Estate Investment Trust) And How It Works

Описание: REIT
A Real Estate Investment Trust or REIT is a company that owns or finances income generating real estate. REITs raise capital from the investors in order to allocate them through real estate investments.
REITs make it possible for average investors to access a well diversified portfolio of real estate and properties more in general with all the problems that usually come with investing in real estate. Slow and beurocratic transfactions, high fees for all the intermediaries and higher liquidity. So that you can exit your investment whenever you want. REITs invest in assets with a long term strategy.
There are two main types of REITs: Equity REITs and Mortgage REITs. Equity REITs generate most of their revenue by collecting income through rents. Mortgage REITs instead, generate revenue through mortgages or mortgage backed securities.
In order to be classified as REITs, companies have to be invested at least for 75% of their portfolio in real estate or real estate backed securities like mortgages and generate at least 75% of income through rents, real estate sales or real estate becked securities like mortagages or mortgage backed securities. They have to pay at least 90% of income to investors through dividends.
REITs may hold commercial or retail properties, leisure facilities like hotels, healthcare facilities, apartments, data centers, energy facilities, pipelines, warehouses and so on…
Usually each REIT is specialized in a specific kind of real estate or facility more in general, but there are also REITs that already hold a well-diversified portfolio.
A lot of REITs are public and they be traded on the open market just like any other stock.
REITs have lots of pros: they’re relatively safe bets given the fact that they generate income thanks to the rents they collect, and pay out investors through dividends. They usually have higher dividends compare to the overall market.
The cons of REITs is that they don’t appreciate in value as much as the broader market and investors have to pay taxes on the dividends that are payed-out.
#reit #realestateinvesting #investing

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