The allure of real estate investing is hard to resist for many investors. As a matter of fact, the question of whether real estate is a better long-term investment than stocks remains a hot topic among investors. Now, let’s define a real estate investment trust (REIT).
It combines the best of both worlds for investors. By owning shares of a REIT, a REIT fund, or a REIT ETF, you own shares of the real estate and its profits. This investment does not require you to do real estate work, nor do you have to attend closings—you can trade these shares on the major stock exchanges.
Table of Contents
Definition of Real Estate Investment Trust
A real estate investment trust is a company that owns, operates, or finances income-generating properties. REITs are partnerships, corporations, trusts, or associations that invest directly in real estate by purchasing properties or buying up mortgages. Shares of REITs trade on the stock exchange and are bought and sold like ordinary stocks.
The definition of a real estate investment trust means a company must invest at least 75% of its assets in real estate and generate at least 75% of its revenue from real estate-related operations.
A REIT pools the capital of numerous investors in the same way as mutual funds. Through this, individual shareholders can profit from real estate investments by earning dividends without purchasing, managing, or financing any property.
Investing in REITs
So are REITs a good investment? As a result of their high total returns, they are great for retirement savings and retirees who require a steady stream of income to cover their living expenses. In addition to apartment complexes, data centers, healthcare facilities, and hotels—REIT portfolios may also include office buildings, retail facilities, self-storage units, timberland, and warehouses.
REITs typically specialize in a particular sector of the real estate market. There are, however, diversified and specialty REIT companies that may invest in different types of properties, such as those that hold both office and retail properties.
A large number of REITs are traded publicly on major exchanges, and investors can buy and sell them just like stocks during trading sessions. As a result, they are considered to be very liquid instruments and trade in substantial volumes. A smart way to invest in REITs is through real estate stocks.
Generally, REITs operate by leasing property and collecting rent on that property—then, paying dividends to shareholders according to the income generated. It is required for REITs to distribute at least 90% of their taxable income to investors, and most REITs even distribute 100%. The dividends paid to shareholders are then subject to income tax.
Difference Between REIT and Real Estate Fund
REITs, unlike professionally managed real estate funds, are legal entities that trade like stocks. Real estate investment trusts can be corporations, trusts, or associations that directly buy properties.
In contrast, income payments from real estate funds are usually calculated based on a fixed percentage of the capital invested. Moreover, real estate funds tend to be much more transparent about the type of properties they invest in. You can also invest in much larger deals through fund operators than you might otherwise be able to do on your own.
REITs have the disadvantage of not being a good choice for passive income, but rather for buy-and-hold investments. In case you prefer not to deal directly with properties and tenants, a real estate fund from Saint Investment Group may be a better option for passive income.
Why Should You Invest in REITs with Saint Investment Group?
First, real estate investment trusts are historically known for delivering competitive total returns, as a result of high, steady dividend income as well as long-term capital appreciation. Moreover, their low correlation with other assets makes them a great portfolio diversifier, reducing risk and increasing returns.
The purpose of REITs is to allow individual investors to participate in the income generated by commercial real estate ownership without actually having to purchase any commercial properties.
As part of our process of selecting real estate investments, Saint Investment Group rigorously analyzes each asset. Our portfolio of real estate includes a variety of property types, each carefully selected to deliver lasting stability while balancing risk.
Among the properties in our portfolio are:
- Retail space
- Office space
- Industrial and warehouse space
- Multifamily residential
To learn how we can help you with your real estate portfolio, give us a call at 949-881-7128 at Saint Investment Group today!
President of Saint Investment Group
Nic is a two decade seasoned expert in investing and capital raising, specializing in Real Estate and debt markets. With Saint Investment Group, he leads large-scale distressed asset purchases and innovative syndications for investors.