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What Is a REIT?

What Is a REIT?

An REIT is one way investors can glean the benefits of owning commercial real estate.

REIT may not be an acronym that you’re familiar with yet. It stands for Real Estate Investment Trust. What is a Real Estate Investment Trust? A REIT is an investment company that owns or finances the purchase of property that could be or become income-producing. The income-producing real estate they work in depends on the company, but it could be across any sector, from office buildings to warehouses to retail centers. Buying an income-producing property is an investment, and these companies thrive off of the income produced by their properties and in the market as a whole. REITs also allow other people to invest in real estate the same way that they invest in stocks – so they can get in on the action without having to buy a whole building. Read on to learn more about REITs.

What Do REITs Own?

In the simplest terms, REITs own property, specifically one that produces a profit. It might be commercial or industrial real estate. For instance, a REIT might specialize in just apartment buildings or strip mall retail. Alternatively, a REIT might invest in many different types of property, but limit themselves to a small geographic area. More often than not, a REIT will focus on one property type. The type of REIT is determined by what it buys or who invests. REITs are generally equity REITs, but they can also specialize. Specifically, mREITs provide financing for mortgages and earn income from the interest rather than from owning and renting property. Public non-listed REITs are registered with the SEC but not publicly traded, while Private REITs are not traded and are exempt from SEC registration.

How Do REITs Make Money?

The major source of income for REITs is rent. They buy properties, usually through the investment funds from investors, and then rent out that commercial or residential space for profit. The profit is then turned over to shareholders, and they are the ones who pay income tax on it. The main purpose of the company is not to make money for itself but to maximize profits for its investors. 

How Does Investment Factor In?

REITs can be great investment opportunities because they tend to be pretty stable and consistent with their returns, though those are still driven by the realities of life. REITs are a good way to diversify your portfolio and limit your overall risk.

Trust the Professionals at Clagett Enterprises for Your Realty Needs

If you’re looking for an experienced property management company, the perfect realtor for your property, or a professional to assist you during your purchase of any home, you can rely on Clagett Enterprises. Clagett Enterprises is a full-service real estate company with almost 30 years of experience in the Frederick and Western Maryland area. For assistance with commercial sales, leasing, management, and development and consulting, contact us online or give us a call at 301-665-6009. To meet our team and see some of our beautiful homes, follow us on Facebook and Linkedin.

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