Real Estate Investment Trusts

Real Estate Broker/Owner with Realty World Atlas BK 602473

Real estate is a big business and everyone seems to want to invest in real estate. You keep hearing a lot of stories about how people made a quick buck by investing in real estate. There are stories about people who made $50,000 even $100,000 in a blink of an eye by making the right kind of investment in real estate. Every now and then, newspapers keep coming up with statistics about the appreciation in the real estate prices after the Great Recession. There seems a mad rush for investing in real estate. House flippers, Investors, Hard Money Lenders, etc., are all “in.” However, not everyone has the time, money and expertise to be able to profitably invest in real estate. So what does one do? Is there any other option?

Yes, there is another way of investing in real estate and that is through a Real Estate Investment Trust (REIT). A Real Estate Investment Trust is an organization that invests in real estate as a full fledged business. By investing in a Real Estate Investment Trust, you can become part of the real estate investment party and enjoy profits (of course, the assumption here is that the Real Estate Investment Trust is good and professionally managed).

NAREIT tells us that “Congress created REITs in 1960 to make investments in large-scale, income-producing real estate accessible to average investors. Congress decided that a way for average investors to invest in large-scale commercial properties was the same way they invest in other industries — through the purchase of equity. In the same way shareholders benefit by owning stocks of other corporations, the stockholders of a REIT earn a pro-rata share of the economic benefits that are derived from the production of income through commercial real estate ownership. REITs offer distinct advantages for investors: portfolio diversification, strong and reliable dividends, liquidity, solid long-term performance and transparency.”

Investing in Real Estate Investment Trust is very easy too. You can just buy Real Estate Investment Trust shares which trade on all major exchanges. There are certain laws governing the Real Estate Investment Trusts that help them avoiding the tax at corporate levels e.g. it is mandated that Real Estate Investment Trust’s portfolio has 75 percent of investment in real estate. Moreover, 75% of the income of Real Estate Investment Trust must be from rents or mortgage interest. There are various types of Real Estate Investment Trusts. Some Real Estate Investment Trusts own properties themselves and hence feed on the rental income from those properties. Some others indulge in providing only mortgage loans or go for mortgage backed securities (MBS). Then there are Real Estate Investment Trusts which do both i.e. rental focussed investments and mortgage backed investments.

There are a number of Real Estate Investment Trusts operating in the market and a lot of these Real Estate Investment Trusts are doing good business. By investing in Real Estate Investment Trust you are basically investing in real estate without actually buying a property yourself. This is one easy way of investing in real estate (and much safer too). You must surely evaluate this option for your real estate investments.


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Maren Mather
Midvale, UT

Thanks for your thourough post!  I am wondering about how REIT's play into 401k's and such.  My retirement account has a large % of real estate investments.  Can retirement accounts buy into REIT's to provide income to their investors?


Hopefully that makes sense...

Apr 18, 2019 09:25 AM #1
Nathan Allan
Searching for Brokers - Orem, UT
Agent Professor Student

Maren Mather Yes, a 401K can buy into REITs. It depends on your company though and if the package of investments they offer include REITs. It also depends on whether or not the specific REIT you are wanting to invest in is publicly traded or not. Some REITS are simply through private companies, others are public but not listed on the NYSE or NASDAQ for example.


Hope that helps!!

May 08, 2019 01:54 PM #2
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Paul D. Diaz, MBA

Real Estate Broker & Instructor, Adjunct Professor
(707) 728-5342
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