REITs are companies that own income-producing real estate. Income is generated through leasing, renting, or selling properties. This income is then distributed as dividends to the shareholders. They’re a great way for individual investors to invest in real estate without the risks of owning properties themselves.
This post is about REITs 101.
Let’s dive into the top 5 basics of REITs 101:
1. Different types: Equity, Mortgage, Hybrid
Equity: these REITs own and operate properties
Mortgage: these REITs finance real estate through mortgages
Hybrid: as its name suggests, this is a combination of property ownership and financing.
2. Tax Advantages
REITs are required to distribute at least 90% of their taxable income to its shareholders; therefore, making it a popular choice for investors looking for income producing assets.
3. Liquidity
Many REITs available are also publicly traded, similar to stocks, making them easy to purchase and sell. They’re a good way for investors to expose themselves to real estate without getting their cash tied up in properties until they’re sold.
4. Accessibility
Since they’re publicly traded on stock exchanges, that makes REITs incredibly accessible. You could start investing just on your phone – without even going to any open houses! Again, they’re a good way for investors to gain exposure to real estate investing without owning properties.
5. Diversification without Risk
Real estate is one of the most powerful ways to build wealth, but it can be quite difficult to do so seeing as how the barrier to entry is so high and, in most cases, unattainable. Given its liquidity and accessibility, REITs offer diversification without the risks of owning properties.
To reiterate, the top 5 basics of REITs 101 are:
Different types: Equity, Mortgage, Hybrid
Tax Advantages
Liquidity
Accessibility
Diversification without Risk
There you have it! Interested in learning more about different options for REITs? Check this post out for the best REITs for income.
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