Real Estate Investment

Real Estate Investment Trusts (REITs)_ A beginner's guide to investing in the real estate market.
A beginner's guide to investing in the real estate market

In this video,
We will learn about-
what is a Real Estate Investment Trusts (REITs),
Benefits of it investing in REITs
And
Why Invest in Real Estate?
Let’s understand -

Generally, when we think about real estate investing, the first thing that probably comes to mind is home.
But do you know, real estate investors have lots of other options when it comes to choosing investments, and they are not limited to real estate?
We will understand in this video -
Over the past 50 years or so, real estate has gained popularity as a means of investment and Diversified real estate exposure is provided by real estate investment trusts (REITs).


What is REITs ?
A real estate investment trust (REIT) is created when a corporation (or trust) is formed to use investors’ money to purchase, operate, and sell income-producing properties.
REITs are a type of investment vehicle that allows individuals to invest in a diversified portfolio of real estate properties.
REITs can own and invest in a variety of different types of real estate properties, including office buildings, shopping centers, apartment complexes, and hotels.
These properties are often managed by professional property management companies, which allows investors to own a piece of the real estate market without having to deal with the day-to-day responsibilities of property management.
REITs have the benefit of being highly liquid.
Just like stocks and exchange-traded funds (ETFs), REITs are publicly traded on major exchanges.
To qualify as a REIT, the entity must pay out 90% of its taxable profits in the form of dividends to shareholders.
By doing this, REITs avoid paying corporate income tax, whereas a regular company would be taxed on its profits, thus eating into the returns it could distribute to its shareholders.
Much like regular dividend-paying stocks, REITs are appropriate for investors who want regular income, though they offer the opportunity for appreciation, too.

What are its benefits?
● REITs offer a way for investors to gain exposure to the real estate market without purchasing and managing physical properties themselves.
● This benefits those new to real estate investing or who do not have the time or resources to manage properties independently.
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● REITs offer a relatively stable source of income as the majority of their income comes from rental payments and other property-related income.
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● A large percentage of REITs' earnings must also be distributed to shareholders in the form of dividends, which can be a reliable source of income for investors.

But REITs have some drawbacks too
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● The value of REITs can fluctuate depending on the overall performance of the real estate market.
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● REITs can be more volatile than other types of investments.
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● REITs can be affected by changes in interest rates, which can impact the value of their properties and the income they generate.

Why Invest in Real Estate?
Real estate can enhance the risk-and-return profile of an investor’s portfolio, offering competitive risk-adjusted returns.
In comparison to equities and bonds, the real estate market is one of low volatility.
Real estate is also attractive when compared with more traditional sources of income return.

Understanding fees and taxes
● Publicly traded REITs can be purchased through a broker.
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● Generally, you can purchase the common stock, preferred stock, or debt security of a publicly traded REIT.
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● There will be brokerage charges.
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● Non-traded REITs are typically sold by a broker or financial adviser.
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● Non-traded REITs generally have high up-front fees.
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● Sales commissions and upfront offering fees usually total approximately 9 to 10 percent of the investment. These costs lower the value of the investment by a significant amount.