Real Estate Investment Trusts (REIT) are those companies that are said to operate, invest or finance in some high income-generating real estate in different types of properties. There are a high number of requirements that these companies will have to meet so as to qualify as a Real Estate Trust.
The idea of these Real Estate Trusts was implemented after the formulation of Mutual funds. It is the best opportunity for investors to have a share in real estate. One earns a fixed income through different ways that help in the growth of the communities.
Some Basic Key Functions Of These real Estate Trusts:
∙ Real Estate Investment Trusts have opened the doors for anyone who wants to invest in different assets of real estate just as they finance in various companies. They do this by buying individual company stock or purchase through a mutual fund or exchange-traded fund (ETF).
∙ The operating methods of these Real Estate trusts are quite easy to understand and work upon: lease some space and go on collecting the rent on that real estate, this helps in producing a set income which is then, divided to all the shareholders as a dividend.
∙ Real Estate Investment Trusts just pay all the income generated which is taxable as a share or dividend to its shareholders, while shareholders have to pay the required tax on that dividend obtained.
Different Real Estate Investment Trust categories are as given below:
∙ Equity REITs–
These are the ones that own or operate that real-estate that have the capability of gaining profits. REITs are mostly public equity∙
Public Non-listed REITs–
These are the ones that do not trade in any National Stock Exchanges. But registration has already done with the Securities Exchange Council.
∙ Mortgage REITs–
They are the ones that go for financing the real estates that earn us a fixed income by getting into the process of buying or initiating mortgages or mortgage-backed securities. This helps in gaining a hefty amount of money through the interest on these one-time investments.
∙ Private REITs–
These are the ones that do not trade in any National stock Exchanges and they have also not been registered with the Securities Exchange Council.
Benefits of investing in these Real Estate Investment Trusts:
∙ Long-term Return Opportunity:
Investing in these trusts brings a long-term opportunity to earn a substantial income without any work done.
∙ A steady Income Generation:
You can relax and enjoy fix and long-term returns on these dividends.
∙ Complete Transparency:
There are different Independent directors, auditors, and analysts along with the business and financial media who play a crucial role in maintaining the performance of these trusts. To maintain total transparency in the deal protection is provided to the investors to gain their trust.
∙ Diversification In Portfolio:
You can now get access to earnings from real estate which has less relation with other bonds or stock available in the market.
All the shares of publicly listed REITs are tradable at major stock exchanges which provide stability and reliability in the flow of income.
Thus, these Real Estate Investment Trusts play a pivotal role in helping different investors by providing a safe and convenient method of investment in different assets of real estate. These are helpful in producing a steady income channel that is taxable. It has its pros of being completely free of any effort done other than investing in diversified properties. It is up to you to select any REIT for financing their assets based upon your preferences and interests.