Aside from owning their own home, many investors regard investing in real estate as a great way to build their wealth, while long-term tenants pay-down the mortgage, property taxes, utilities and insurance expenses.
The only challenge investors face is the amount time and effort needed to maintain a real estate investment portfolio as an individual investor. On the other hand, the prospect of purchasing, leasing and managing properties as part of a group of investors contributing to a real estate investment trust (REIT), is much more appealing to individuals.
Investing in real estate as a great way to build your wealth, while long-term tenants pay-down the mortgage.
A REIT is a real estate investment trust that is created when a corporation (or trust) invests investors’ money into properties that will generate income from lease agreements with tenants. Generally speaking, REITs own and operate commercial properties such as apartment complexes, hospitals, office buildings, timber land, warehouses, hotels and shopping malls.
A REIT is a real estate investment trust that is created when a corporation (or trust) invests investors’ money into properties that will generate income from lease agreements with tenants.
REITs have existed for more than half a century in the United States. The U.S. Congress granted legal authority to form REITs in 1960, as an amendment to the Cigar Excise Tax Extension of 1960. In 1969 the first European REIT legislation (the Fiscal Investment Institution Regime) was introduced in The Netherlands. The REITs in Europe were later encouraged by widespread adoption in France (2003), Germany and the United Kingdom (2007). Nowadays, an estimated 40 countries across the globe offer REIT investments, and represent an equity market capitalization of approximately US$2 trillion.
Some REITs are traded, some are registered and public, but not listed on an exchange; other REITs are privately-held.
REIT investments represent an equity market capitalization of approximately US$2 trillion.
REITs provide a liquid and non-capital intensive way to invest in real estate. Comparable to mutual funds and regular dividend-paying stocks, REITs are a popular investment with investors who desire a consistent income from real estate, and do not want the headache of managing tenants or maintaining the property.
REITs are a popular investment with investors who desire a consistent income.
From the close of February 2009 through the end of October 2014, stock-exchange listed Equity REITs delivered total returns of 312% (28.4% per year), outpacing the return of 217% (22.6% per year) in the broad stock market and 210% (22.1% per year) in large-cap stocks.
Because they are largely uncorrelated with stocks and bonds, REITs provide a measure of diversification for investors who are adverse to the risk potential of traditional investments. Using the REIT approach to investing in real estate investors can avoid over-dependence on a single company, geographical area or industry.