Real estate investment trusts or REITs are essentially companies that own, finance or manage income-generating properties. They invest in a wide range of real estate types—from apartment buildings to medical facilities, retail, offices, warehouses, all the way to infrastructures such as cell towers, fiber cables, and energy pipelines.If you are familiar with how mutual funds work, you already have a good understanding of how to invest in REITs.
Like mutual funds, a REIT pools the capital of many investors into a basket and invests them in income-producing properties. This lets individual investors make money in the form of dividends from the REIT's property investments without having to purchase, operate, or finance any real estate properties themselves.REITs can generate a solid and steady income stream for people who invest in them, but they don't offer much capital appreciation. Still, they are trendy with investors who want to invest in the property market while staying liquid. That's because most REITs can be traded like stocks and are therefore easier to sell than physical properties. Recent estimates say that REITs collectively own around $3 trillion in assets, with publicly traded equity REITs accounting for about $2 trillion.
Diversification
REITs are also further categorized based on how their shares are purchased and held:
You can quickly put money in publicly traded REITs, REIT exchange-traded funds, and REIT mutual funds by buying shares through a broker.If you're interested in buying non-traded REIT shares, you have to talk to financial advisors or brokers participating in the offer. It's always prudent to do some background checks on the investment advisor or broker recommending the REIT. Luckily, the SEC provides a free search tool where you can check if an investment professional is registered and licensed.
