What is a REIT (Real Estate Investment Trust)? What are the different types of REITs? How I invest in REITs?

                          

What is a REIT (Real Estate Investment Trust)?

A real estate investment trust (REITs) is a company that provide an investment opportunity, and allow anyone to invest in portfolios of real estate assets the same way they invest in stocks through a mutual fund or exchange traded fund (ETF).

REITs allow investors to invest in and earn profit from Commercial real estate, which is not otherwise easy accessible to small retail investor because, it is too expensive and require a large investment.

Now the Question is, How Do REITs Generate Returns for Investors?

  

Step-1:- REITs collects the money from the investors. 

Step-2:- These monies are invested mostly in Rent generating properties. Properties generate rental income every month (periodic).

Step-3:- REITs will distribute the rental income Money among the investors.

Step-4:- The Capital Values of the properties may also raise over a period of time. The Net Asset Value of the REIT units may raise depending on the capital appreciation.

Step-5:-The investors can sell the units for gain/loss in the secondary market (on exchanges were REIT units are listed).

It is mandated that Real estate investment trust’s portfolio has at least 75% of investment in real estate. Moreover, 75% of the income of Real estate investment trust must be from rents or mortgage interest (in case mReits). It is required to pay at least 90% of taxable income as dividend.

There are various types of real estate investment trusts, such as:-

💢Sectorial REITs:-

·         →  Retail Reits

·         →  Office Reits

·         →Industrial Reits

·         →Multifamily or Residential Reits

·         →Storage Reits

·        →Hospitality & Healthcare Reits

·         →Diversified Reits 

💢Mortgage Reits (mREITs):- 

it is mostly involved with lending money to proprietors and extending mortgage facilities. Further, Reits tend to acquire MBS. It generate income in the form of interest on the money they lend to properties. 

💢Hybrid Reits:- 

Mixture of sectoral and Mortgage REITs.

How I invest in REITs?

REIT are listed and traded on stock markets just like Exchange traded funds (ETF), as a result, purchasing units on the stock market is the best way to invest.  

Step-1:- A Demat Account is mandatory.

Step-2:-The price of REITs units on stock market changes depending on both the demand for Units as well as the performance of the REITs.

Step-3:- You can also invest in REITs through mutual fund, Now days some Mutual funds also have exposer of REITs in their portfolio. 

Step-4:-Now let's answer the question- "Should you invest in REITs"?

Please do comment your doubts and feedback..

Thank You, Stay Healthy and Safe....