A beginner’s guide to REIT investing

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A beginners guide to REIT investing
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If you have just started your journey as an
investor and are looking to invest in real estate
without actually physically buying a property,
REITs are the best way to achieve this. However,
as a beginner, you might be quite confused about
the whole topic of REIT investing. To help you
get clarity in this regard, heres your complete
beginners guide to REIT investing
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What exactly are REITs? REITs is the acronym
for Real Estate Investment Trusts - these are
companies that maintain a portfolio of
money-making properties. REITs own commercial
properties like business complexes, housing
apartments, hotels, hospitals, and any other such
properties that are great assets to earn income
from the real estate industry.
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How does a REIT function? REITs technically
look for investors who wish to become a part of
the real estate industry and use their capital to
buy, sell and manage properties in an effort to
cumulate huge profits. They offer dividends to
their investors in return for their invested
capital. REITs by law are required to give 90 of
their income after tax as dividends and thus are
amazing steady income financial assets. You can
find many REITs listed in the private markets as
well as the public markets and they prove to be
pretty liquid investments in both the
marketplaces.
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What are the types of REITs present in the market
today? There are mainly 3 types of REITs present
in the market today - 1) REITs working on
equity-based income - Many REITs present in the
market today are equity REITs. Their main source
of income is rent which gets distributed to
investors in the form of dividends. 2) REITs
working on mortgage-based income - These REITs
earn their income from mortgages and loans. Some
even make profits from buying and upselling
properties backed by mortgages. However, their
main source of income is the profit from the
interest they receive from giving property loans
and the cost of financing them, much like a bank.
3) REITs making the best of both - Hybrid REITs
are made by combining the above two types of
REITs and offer their investors the best of both
worlds.
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