Financial/ stock markets across the globe offer many types of commodities and products to investors to earn a profit. While shares are the most popular products that investors put money in, several other means of investment are gaining popularity. In addition to mutual funds, real estate investment trusts (REITs) have become a popular form of profit-generating investment in the financial markets.
REITs are companies that own real estate assets that generate profits. In most cities, new retail, residential, and commercial spaces are being developed. These are real estate assets that REITs hold and attract investment in by promising income stability.
REITs Explained
High-value real estate properties are becoming popular across the globe, and many companies consider investing in them to earn profits. REITs are companies that manage high-value real estate properties. These companies offer investors the chance to own space in these high-value properties to earn income either by renting these invested properties or developing these properties as multi-use buildings.
There are different types of REITs, including:
- Equity trusts are the ones that own and manage real estate, which helps investors earn income through rents
- Mortgage trusts offer mortgage facilities and lend money to owners of high-value real estate assets, and their source of generating income is interest from mortgages
- Hybrid trusts adopt the models of equity as well as mortgage trusts to earn income through rents as well as interest
- Private REITs are private companies that work with a selected few investors and are not listed on the stock markets
- Public REITs are listed on the stock markets and usually offer shares of the real estate asset to investors. The investors can trade these shares to generate the required level of income.
Popularity of REITs
REITs allow investors to own high-value real estate assets without directly owning them and earn money from them. Direct ownership of real estate comes with its challenges, such as increased investment and time commitment.
When investors invest in REITs, these challenges are overcome, and therefore, real estate investment trusts have become popular investment options. Additionally, REITs offer several features and benefits that make them popular. Some of these include:
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Accessible and Affordable
Investors find it easier to invest in REITs, as these can be bought and sold as stocks in the share market, as opposed to buying and selling real estate. Moreover, for investors, buying shares from these trusts is more affordable than investing in some property and managing it before it gets sold.
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Attractive Profits
Real estate investment trusts have become popular with investors, as they offer a steady return on income and pay high dividends. These trusts are required to pay a minimum of 90% of their taxable earnings to investors in the form of dividends every year. So, even when the market is not steady, the investors may receive a steady flow of income.
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Diversified Portfolio
Investing in REITs allows investors to have a diversified portfolio rather than investing in only shares or stocks or a single type of product. Further, this allows investors to generate profits from multiple products.
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Liquidity
REITs offer shares and stocks that can be traded in the stock market. This means that these products are easy to buy and sell, and therefore offer investors an opportunity to earn profits when the opportunity is right.
To Sum It Up
Investors wanting to earn a high rate of return should invest in REITs, as these are lucrative investment options that can be traded on the share market.
