REITs are a major part of the real estate asset class in the USA with total gross assets above 3.5 trillion dollars. Out of 3.5 trillion dollars, public REITs own 2.5 trillion dollars of assets. Almost 3 million people in the USA are engaged in REITs.
There are about 207 REIT companies in the USA while a total of 893 globally.
What are Real Estate Investment Trusts (REITs)?
Real Estate Investment Trusts (REITs) buy income-generating real estate, operate them and sometimes finance them too. REITs can own any type of property. For example, Commercial Real Estate that includes malls, hospitals, hotels and office buildings. They can also own residential real estate e.g. apartments and homes.
REIT was first invented by the USA in 1960. The motive was to give investment opportunities to every-day investors.
REITs are structured as mutual funds. Just like mutual funds, REIT investors have a claim to the gains made by investments done by the REIT.
How do REITs work?
REITs are mostly formed by real estate companies. These companies act as a sponsor for REIT when it is formed and appoints a trustee who is responsible for holding the assets of the trust.
The trustee appoints a manager to manage the assets of trust. The manager also takes decisions regarding investment. The REIT management then attracts the retail shareholders who act as the unitholders.
REITs pool funds from investors to purchase various types of properties such as apartment buildings, office buildings, shopping centers, hotels, hospitals, and commercial parks. Each investor is a unit holder.
The REITs earn either through rents coming from their properties or the capital appreciation on the sale assets.
REITs have to distribute 90% of their investments as dividends among the unit holders.
Is Real Estate Investment Trust A Good Career Path?
Real Estate Investment Trusts, commonly known as REITs, offer numerous advantages as a good career path.
They provide liquidity and ease of usage; meaning, the selling and buying of properties can be done within a few days. On the other hand, actual real estate typically takes several months to be bought or sold.
It provides you the benefits of real estate without you investing a large amount of money by yourself.
REITs also provide diversification benefits to small shareholders who cannot afford to own properties. They provide a regular and steady cash flow to their unit holders.
As any career path has some drawbacks, REITs also challenge you in some areas.
The entity itself has tax advantages but there are no tax benefits for the investors. The investors have to pay taxes on the dividends they get from the company.
REITs can be affected by several factors, including changes in interest rates, economic downturns, and shifts in property values. This can lead to volatility in the value of REIT investments.
Overview
Over the past few years, the importance of REITS as a career path has increased. However, there are both high and low points in choosing Real Estate Investment Trust as a career path, both as a trustee or an employee.
It is important to know about the pros and cons of a field before choosing it as a career. I hope this discussion was somehow useful and informative for you. You can share your point of view with us in the comment box below.
Read Also:
- Step by Step Guide to Changing Careers
- Changing Your Career Or Starting A New Business: What You Need To Know
- Real Estate As A Retirement Investment
