People who are familiar with the functionality of Mutual Funds will not have difficulty in understanding what REIT or Real-Estate Investment Trust is. It is quite similar to Mutual Funds. REIT is a body or a security type that deals in real estate investments through ways of mortgages and also exchanges stocks for investment into real estate.
By investing through REIT, people have a good stake that provides a maximum yield in the long run to the investors. It is a great source for investors of all types of investors to get hold of real estate share. People who like to have an ownership of real-estate and can’t think of investing hugely in real estate can easily opt for this option that is open for both small and big investors.
Must know Information about REITs (Qualifiers)
•The number of shareholders that are permitted to be included in the trust is 100. Also, up to five members can have shares of 50% out of the 100 shareholders.
•100% of the assets of REIT cannot be retained by the members. 70% should be invested in real estate properties. The income The REITs have should have a contribution of 75% from real estate.
•The DRIPs or Dividend Reinvestment Plans is a lucrative option for investors. DRIPs have an option that makes it possible for the investor’s returns to compound in the long run.
•At least 90% of the income that is taxable through shareholder dividends
•There must a board of directors to manage the company.
The Growing Importance of REITs
With the passage of time, REITs have become an important aspect of most of the elements of Real Estate like hospitals, hotels, student housing, properties of industries, infrastructure etc. Now, properties owned by REITs are easily available in almost every corner of a city. If we talk about the scenario outside India, to be the price the USA, 1.8 million jobs in the country has a strong support of REITs. This has been stated as per the study by Ernst and Young. The legislation of REIT is popular in more than 35 countries at present.
Equity REITs have got a place of greater importance along with other Real Estate Companies after the successful closure of Trade in Aug 2016. REITs and other real estate companies have got a lift to a fresh concept of Real Estate Sector. It is a good jump from being in GICS or Global Industry Classification Standard certified financial sectors.
How to Make an Investment in REITs
More and more people are aspiring to invest in REITs. It is possible to do so as the procedure is not too complex.
•Any individual is free to choose any of the public REIT and that can be found by checking the list of major stock exchange. That can be done by opting for shares through a dealer of securities.
•One can also get in touch with financial advisors of a superior level or professional brokers who can recommend the best REIT investment for the investors showing willingness.
•The price of the REIT shares varies on various criteria. It is advisable to have a close eye on the stock exchange to know of the current price of REIT Shares.
Criteria on which REIT Shares Depend
•The profit that shares earn in a duration of time
•Return that one can assume from the stock
•Yields from the current dividends when compared to other investments which are yield oriented too
•Payout ratio of dividend
•The quality of the management that is running the shares also impacts the REIT shares
•The asset values that can come with real estate or mortgages
Benefits of Investing in REITs
There are many benefits of investing in REITs and therefore many people are now driven towards such investments.
•The earning potential of an investment in REIT is huge when compared to other investments in Real Estate. After all, profits are what investors are looking at.
•It is an important aspect of savings during retirement. If you are planning for retirement, nothing beats the profitability that comes with REIT.
•Listed equity REITs have shown tremendous growth in earning over the years.
•It is an important part of the economy of any country that can change the economic condition of any state or country.
Most of the companies now have turned into REITs for the future prospects of earning they see.
Many people are still new to REITs. With this piece of information on REIT, one can decide to invest in this trust and gain more in the long run.