Real Estate Investment Trusts are exchange-traded real estate funds. They are like a transparent real estate investment vehicle that offers the benefits of equity investments. Let’s understand in detail what REITS are, their characteristics, advantages, and types.
Real Estate Investment Trusts?
Real estate investment trusts REITs are unique forms of a corporation. They are listed as real estate stock corporations that invest in real estate and land and receive income from renting, leasing, or selling real estate. REITs are an incredibly safe investment, as they offer a growth rate and are, therefore, a crisis-proof form of investment. It is why real estate is currently very popular with investors.
Characteristics Of REITs
These are publicly traded corporations with a clear focus on real estate (at least 75% of the company’s income and 75% of its assets must be in real estate). Besides, at least 15% of the shares must be held by investors who do not own more than 3% of the company. The most important feature is the corporate tax exemption. Nevertheless, taxes are levied on the investor side. You also pay income tax on the dividend.
Who Is This Investment Suitable For?
One of the main advantages of this type of investment is high dividends and focus on real estate. Therefore, REITs are suitable for investors for whom either a standard property is too expensive or who already have one but want to diversify further. Everyone has to decide for themselves whether they are actively trading themselves or using ETFs. However, in general, REITs should not be bought exclusively, but are intended as an additional investment.
Benefits Of REITs
REITs bring many advantages for investors. One advantage of REITs is that they are always available as they are traded on the exchange. Since all REITs have to be stock corporations, they are very transparent. You must publish annual financial statements that disclose the company’s current financial position. It enables you to get a comprehensive overview of the financial situation before investing in the relevant REIT real estate. Since the stock corporations are also obliged to submit reports and ad hoc notifications during the year, you can always find out about the current development even after the initial investment. Also, decide whether you want to keep your shares or sell them on the stock exchange. Another advantage of REITs is the high payout ratio. In most cases, around 90 percent of profits are paid out directly to shareholders as dividends.
Three Types Of REITs
There are three types of REITs: Equity REITs own and operate real estate and generate income primarily from managing their real estate holdings (lease and rental income). The second type deals with financing for real estate projects or with secured mortgages and private placement securities. So these real estate investment trusts do not invest directly in real estate. There are also mixed designs of both forms.
Final Words
These were some essential things that you should know about the real estate investment trusts REITs. If you want to learn more about the best real estate investment trusts, then do visit Geraci Law Firm‘s website. There, you can also find the best fund formation lawyer that you can hire for your firm.
