Written by What Are REITs?
- Definition: Real Estate Investment Trusts (REITs) are companies that own, operate, or finance income-producing real estate and allow individual investors to invest in large-scale, diversified real estate portfolios.
- How REITs Work: REITs generate income through rent, lease payments, and capital gains from property sales, and they are required to distribute a significant portion of their income to shareholders.
Types of REITs
- Equity REITs: These REITs invest directly in properties, such as office buildings, shopping malls, or apartment complexes.
- Mortgage REITs: These REITs invest in mortgages and other real estate loans, earning income through interest payments.
- Hybrid REITs: These REITs combine both equity and mortgage investments, providing a diversified approach to real estate investment.
Benefits of Investing in REITs
- Diversification: REITs provide exposure to real estate, an asset class that can offer diversification in a portfolio dominated by stocks and bonds.
- Liquidity: REITs are traded on major stock exchanges, providing liquidity compared to direct investments in real estate.
- Steady Income: REITs are required to distribute at least 90% of taxable income to shareholders, providing regular income through dividends.
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