Investing in Real Estate with REITs

What is REIT?

A REIT is a company that pools money from investors to buy or finance real estate and that is required to distribute at least 90% of its taxable income to its investors every year. As a result of the requirement, REITs may at times pay higher dividends than other types of companies.

THE TWO MAIN TYPES OF REITS; EQUITY AND MORTGAGE

Equity REITs own and usually manage income-producing properties, such as shopping centers, office buildings, hotels, and warehouses. They receive most of their revenue from rent.

Many equity REITs focus on one main type of real estate. For example, a REIT may choose to specialize in just retail properties or just office buildings. Other REIT property sectors include residential, healthcare, lodging, industrial, self storage, timber, infrastructure, data centers, and specialty sectors. Some REITs own properties in more than one property sector and are referred to as diversified REITs.

Mortgage REITs focus on financing real estate, with most of their revenue coming from the interest they earn investing in mortgages or mortgage-backed securities.

HOW TO INVEST

There are a few ways to invest in REITs. One way is to simply buy shares of a publicly traded REIT the same way that you would buy shares of stock. Or you can buy shares of a mutual fund or ETF that focuses on REITs. Non-publicly traded REITs may also be an option, but please keep in mind that they involve special risks, such as lack of liquidity.

Unsure of how to get started? Copper leaf Financials’ team of CPAs and experienced financial planners are here to consult you on any financial matter, including REITs. Get the help you need now and be better prepared for the future. For more information call 802-878-2731.