Real Estate Investment Trusts REITS

A Real Estate Investment Trust, or REIT, is an entity that invests money into many different types of real estate assets.  These include commercial real estate such as stopping centers, office buildings, and hotels or it can include apartments, condiminiums, houses, and other forms of property. REITs are traded on the major stock exchanges and can be bought by investors looking to expose themselves to the real estate market without actually buying real estate.

REITs offer one great alternative to buying real estate; liquidity.  You may buy and sell your shares at any time.  Real estate investment trusts also offer DRIPs, or dividend reinvestment plans. 

Types of REITs

There are three main types of REITs that you can purchase: Equity, Mortgage, and Hybrids. 

Equity REITs follow the more traditional path of investing in real estate.  They purchase the building and rent it out to tenants.  The revenues of an equity REIT come primarily from the rents that they collect.

Mortgage REITs lend money to those looking for loans to buy real estate.  This type of REIT will also invest in mortgage backed securities which pool mortgages together and create to create the security.  The main goal of a Mortgage REIT is to profit off of the interest received from lending their money out. 

Finally, Hybrid REITs are exactly as they sound.  They take equity ownership and act as lenders at the same time.

Rules for Becoming a Real estate investment trust

In order to qualify as a REIT, a couple of criteria must be met.  First, you must invest at least 75% of your assets into real estate and generate at least 75% of your revenue from rents or interest on mortgages that reside within the REIT.  Additionally, a REIT must disperse at least 90% of its taxable income to its investors in the form of a dividend.

REITs Research

If you are looking to get into the REIT market, do a little research first.  Here is a list of over 200 REITs which are traded on the major stock exchanges. 

REIT list
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