ReSET Blog
Ask An Agent · January 28, 2020 · AUTHOR: Roy Dekel

REIT: What does it stand for?



A real estate investment trust is an organization owning and operating real estate that generates income. Most are specialized in specific real estate sectors, focusing time, energy and funding on that particular segment for the entire real estate horizon.  Although, diversified and specialty REITs often have different types of properties in their portfolios. REIT portfolio generally includes data centers, health care facilities, hotels, infrastructure, etc. one of the day to day benefits of REITs is that they [provide the opportunity to own a real estate which will generate dividend based income.

Most REITs have a direct business format: leases space and collects rents on properties followed by distributing that amount into dividends among shareholders.

Types of REITs :

There are several types of REITs and the funds they have are generally used to classify the type of business they do and can be further used to classify depending on their shares that are bought and sold.

• Equity REITs are the most common type of enterprise whose entities are bought, owned and managed for income-producing real estate. Revenues are obtained from rents and not from the reselling of portfolio properties.

• Mortgage REITs are a type of REIT that lends money to real estate owners and operators which can be either directly through a mortgage or indirectly through acquisitions of mortgage-backed securities(MBS).

• Hybrid REITs hold both physical rental properties as well as mortgage loans in their portfolios. Based on the investing done by the user, they may tilt the portfolio more to property or mortgage holdings respectively.

• Public Traded REITs shares publicly-traded REITs on a national security exchange, wherein they are bought and sold by individual investors.

•    Public Non-traded REITs are registered with SEC but don’t deal with trading national security exchanges due to which they are not subject to market fluctuations.

• Private REITs are registered with SEC and don’t deal with trading national security exchange. Their sole purpose is as a private placement selling to a selected list of investors.

Advantages of REITs:

• Liquidity

• Diversification to assets

• Transparency

• Dividends are stable

• Returns can be adjusted according to the risks

Disadvantages of REITs:

• Capital required for appreciation is low

• There is no advantage against tax

• There is a subject risk to the market

• The cost of management is high along with transaction fees

Investing in REITs

Investment in REITs can be by both public traded or through REIT mutual funds and REIT exchange-traded funds (ETFs). They are also included in several growing benefits and contributions defined by employer-sponsored retirement and investment plans. If it is based on performance compensation, they will be working hard to pick the right properties and the best strategies for the investors.

REIT: What does it stand for?

A real estate investment trust is an organization owning and operating real estate that generates income. Most are specialized in specific real estate sectors, focusing time, energy and funding on that particular segment for the entire real estate horizon.  Although, diversified and specialty REITs often have different types of properties in their portfolios. REIT portfolio generally includes data centers, health care facilities, hotels, infrastructure, etc. one of the day to day benefits of REITs is that they [provide the opportunity to own a real estate which will generate dividend based income.

Most REITs have a direct business format: leases space and collects rents on properties followed by distributing that amount into dividends among shareholders.

Types of REITs :

There are several types of REITs and the funds they have are generally used to classify the type of business they do and can be further used to classify depending on their shares that are bought and sold.

•    Equity REITs are the most common type of enterprise whose entities are bought, owned and managed for income-producing real estate. Revenues are obtained from rents and not from the reselling of portfolio properties.

•    Mortgage REITs are a type of REIT that lends money to real estate owners and operators which can be either directly through a mortgage or indirectly through acquisitions of mortgage-backed securities(MBS).

•    Hybrid REITs hold both physical rental properties as well as mortgage loans in their portfolios. Based on the investing done by the user, they may tilt the portfolio more to property or mortgage holdings respectively.

•    Public Traded REITs shares publicly-traded REITs on a national security exchange, wherein they are bought and sold by individual investors.

•    Public Non-traded REITs are registered with SEC but don’t deal with trading national security exchanges due to which they are not subject to market fluctuations.

•    Private REITs are registered with SEC and don’t deal with trading national security exchange. Their sole purpose is as a private placement selling to a selected list of investors.

Advantages of REITs: 

•    Liquidity

•    Diversification to assets

•    Transparency

•    Dividends are stable

•    Returns can be adjusted according to the risks

Disadvantages of REITs:

•    Capital required for appreciation is low

•    There is no advantage against tax

•    There is a subject risk to the market

•    The cost of management is high along with transaction fees

Investing in REITs

Investment in REITs can be by both public traded or through REIT mutual funds and REIT exchange-traded funds (ETFs). They are also included in several growing benefits and contributions defined by employer-sponsored retirement and investment plans. If it is based on performance compensation, they will be working hard to pick the right properties and the best strategies for the investors.


 

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