REIT 101

What are Real Estate Investment Trusts?

A REIT, or Real Estate Investment Trust is a liquid, dividend paying means of participating in the real estate market without actually purchasing Real property. Investors can invest in commercial properties, mortgages, or a combination of both. Generally the REITs invest in shopping malls, office complexes, apartments, warehouses, hotels, or even golf courses. Some The Real Estate Investment Trust even specialize in specific types of properties, or geographical locations.

REIT securities pay dividends and offer the possibility of price appreciation experienced by the real estate owners. You can buy a Real Estate Investment Trust just likean investor buys a stock, or mutual fund.

Most of the major mutual fund families offer these funds to their shareholders. Because these mutual funds allow shareholders to reinvest dividends in additional fund shares, Real Estate Investment Trusts are a good vehicle for investors looking for stable growth. Since REIT are dividend paying securities, the yield will rise as the share price declines just like a Corporate Bond.

So if interest rates continue to rise, they will produce a higher and higher income for investors who need income as the share prices fall. Since this form of investment offers instant liquidity unlike a direct investment in Real Estate properties, you will receive a check within days of the sale.

So if you are nervous about the high prices in the real estate market, and potential negative effects of rising interest rates, but still want to invest, you can at least be assured of a quick exit if prices begin to decline in the real estate market.

If you’d like to increase your investing knowledge, feel free to visit for a list of investment topics.

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