Real Estate Investment Trusts (REITs)

About

Real Estate Investment Trusts (REITs) are financial vehicles that enable individuals to invest in real estate without directly managing properties. Established in 1960, REITs allow investors to pool their capital to invest in large-scale, income-producing real estate portfolios. These trusts own, operate, or finance various types of properties, including office buildings, shopping malls, apartments, and hotels. By investing in REITs, individuals can gain exposure to the real estate market while benefiting from liquidity and diversification. REITs are categorized into several types, including equity REITs, mortgage REITs, and hybrid REITs. Equity REITs focus on owning and operating properties, while mortgage REITs provide financing through mortgages. Hybrid REITs combine both strategies. To qualify as a REIT, a company must meet specific requirements, such as distributing at least 90% of its taxable income to shareholders and investing at least 75% of its assets in real estate. This structure allows REITs to avoid corporate taxes, providing higher returns to investors. REITs offer steady income streams and portfolio diversification but come with risks like interest rate sensitivity and market fluctuations.