What is a Real Estate Investment Trust (REIT)?

It is an undeniable fact that the home you live in is the largest investment you will ever make but the cost and other barriers to get into a real estate market are so high that many investors do not go beyond the front door. However, there is a trust known as a Real Estate Investment Trust or REIT that made it possible for investors to buy properties they thought they would never be able to own.

REIT is a business that buys real estate properties and typically specializes in a particular line of a commercial market. They purchase a series of real estate properties, collect rents, manage them and also pass the money collected from rents to shareholders. The history of a Real Estate Investment Trust goes back to 1960 when they were created by Congress in the United States to give all the Americans an opportunity to invest in income-generating real estate in the same way as they invest in securities, such as bonds and stocks, through mutual funds.

Real estate investment trusts offer diversity because there are different kinds of real estate properties owned by them, such as shopping malls, hotels, apartments, storage facilities, office space, prisons, nursing homes and even the industrial parks. Recently, single family home or residential real estate has also been added in the list. One of the best things offered by real estate investment trust is that it offers investors to participate in a timely trend, without paying a large amount of money. Those who are unable to invest in a housing market can still act as a participant in a residential market by purchasing one of these REITs. However, before making any investment decision, you should discuss the prospects of investments with Your Personal Financial Mentor in order to make a safe investment.

In the New York Stock exchange, there are currently more than 160 different REITs trading which have an estimated worth of $650 billion. However, the value of Real Estate Investment Trusts fluctuates in a market just like any other investment. It can go up or down based on external as well as internal factors affecting the market. Therefore, it is important to trade in the market by keenly observing trends and market conditions. With a tax-sheltered investment account like an Individual Retirement Account (IRA), there is a benefit to own REITs because a large portion of the income that they pass on is taxed as regular income and not as a dividend.

Categories: Real Estate

Leave a Reply

Your email address will not be published. Required fields are marked *

July 31, 2013 What is a Real Estate Investment Trust (REIT)?