What is a Real Estate Investment Trust

“Well, real estate is always good, as far as I’m concerned.” -Donald Trump

A real estate investment trust, or REIT, is a company that sells real estate but allows the public and individual investors to buy shares. REITs are just like any other stock option which represents a company. However, there are two defining features of real estate investment trusts which make it a great investment opportunity. The first feature is that it’s only business is coordinating and monitoring property investments. The second feature is that it has to hand out its profits in the form of dividends.

The reason why real estate investment trusts are so popular is that having the REIT status means that corporate tax is not applied to the business. When non REIT companies make a profit they must pay taxes first and then disturb what is left. However, real estate investment trusts do not get taxed and therefore can distribute all the profits made in the form of dividends to their investors. If you have a large principle which you can invest, real estate investment trusts may be a great option for you. If you are interested in REITs contact a financial advisor who can point you in the right direction and offer advice on how to pick the perfect REIT for you.

REITs are great if you are interested in making an income and living off your investments. REITs have a similar status of high yield bonds in profit producing power and rate of return. Remember, both REITs and high yield investments are high risk which is why they can be, if all goes well, extremely profitable. Real estate investment trusts can be affects by th same factors which influence the stock market and the economy. These may include supply and demand, interest rates, inflation, and deflation. A rise in interest rates is a good indicator of a slowly growing economy. This is great for people invested in REITs because it means that businesses are growing and looking to rent or buy more space. The same is true with residential housing. When the economy is doing well people want to buy homes, apartments, and condos.

REITs are companies that reap the benefits of no corporate tax by managing real estate properties and paying out the majority of their profits in dividends. Dividends can offer an extremely large and stable income which can be much more then the returns from Treasury options or even small cap stocks.