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What Is an REIT?

System - Friday, November 4, 2022
Property Management Blog

Did you know that the historical average dividend yield for REITs is over double the average dividend yield of the S&P 500? This makes investing in a REIT a potentially great financial move. But, let’s take a step back first.

What is a REIT and how can you use these types of real estate investments to generate massive profits? Keep reading to find out.

REIT: What Is It?

You may have heard of REITs or Real Estate Investment Trusts, but do you know what they are? 

REITs are basically like mutual funds for real estate investment. They allow individuals to invest in a diversified portfolio of properties, without actually having to buy and manage them themselves. 

Typically, these types of trusts can be made up of investments in anything from houses and apartments to office buildings and shopping malls. And hey, thanks to REITs, now even the average Joe can feel like a big-shot real estate mogul.

What Do REITs Own?

A Real Estate Investment Trust is a company that owns real estate. Sometimes they manage these properties, but in every case, they generate income from these properties. But you might be surprised by the variety of properties that REITs own.

As mentioned above, these trusts own everything from shopping malls and apartment complexes to data centers and even timberlands. Simply put, REITs invest in all sorts of real estate. Some even specialize in specific types of properties, like healthcare facilities or self-storage units.

How Do REITs Make Money?

How do REITs make money? The same way any landlord does: by collecting rent

REITs own and manage income-producing real estate. This can include everything from office buildings and shopping centers to healthcare facilities and apartments. 

How do they differ from traditional real estate companies then? First of all, REITs are required by law to distribute at least 90% of their income to shareholders each year. That's you!

When you invest in a REIT, you become a part owner of the underlying properties and receive distributions (dividends) based on the cash flow generated from these properties.

In addition, REITs are publicly traded on major stock exchanges, allowing individual investors to easily buy and sell shares in the trust. So next time someone asks how REITs make money, just tell them they're the landlords of the stock market world.

Are REITs a Good Investment?

Are you looking for a way to diversify your investment portfolio and earn some passive income? Are you looking to invest in real estate but unsure about all the hassle that comes with actually owning property? Then yes, REITs might be a good investment opportunity for you.

These securities allow investors to invest in a portfolio of real estate properties without actually having to own or manage them. Plus, they often have high yields.

Get Jacksonville Real Estate Investment Services

At the HomeRiver Group Jacksonville, our team is made up of seasoned professionals interested in ensuring you have the best real estate experience. Whether you’re interested in investing in a REIT or need brokerage services, we’re here to help.

Get in touch to chat about your real estate needs.