Real Estate Investment Trusts: What Are They and Why Invest Now?

Real Estate Investment Trusts: What Are They and Why Invest Now?

( – When inflation is high, real estate is one asset that tends to appreciate over time. However, not everyone has the means to buy properties outright. Fortunately, putting money in a real estate investment trust (REIT) is another way to benefit from the housing market without down payments or credit checks. 

A REIT is a company that owns various pieces of real estate that earn passive income, like apartment buildings, hotels, warehouses, or malls. The entity allows individual investors to buy, trade, and sell real estate without purchasing properties. In return, the REIT shares the income it generates from the real estate it owns with investors.

Several types of REITs exist, including equity, mortgage, and combinations of both. Each carries its own risk level. A trust falls into different categories depending on the type of real estate held within the portfolio. For example, equity REITs own property and operate as a landlord, whereas mortgage trusts don’t own properties outright but hold the mortgages for the real estate instead. Interested parties can even choose a REIT that purchases specific types of real estate or mortgages, like healthcare facilities or office space.

Investors can participate in REITs by investing directly through a mutual fund or exchange-traded fund (ETF). The most significant benefit from this type of investment is the consistent dividend payout, as the law requires REITs to pay 90% of their taxable income to shareholders.

A real estate investment trust can help diversify any portfolio, especially when inflation outpaces many other asset types. Before investing, consult a professional to make sure you understand every aspect of this investment.
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