Investing In REITs (Part 1)

Real Estate Investment Trusts

BFI: Business - Finance - Investments


Real Estate Investment Trusts (REITs) have gained significant popularity among investors in recent years. These investment vehicles offer a unique way to gain exposure to the real estate market without the challenges of direct property ownership. We will delve into the world of REITs, exploring what they are, how they work, the different types of REITs, the benefits and risks of investing in them, and key strategies for successful REIT investing. Whether you are a seasoned investor or just starting your investment journey, this guide will provide you with valuable insights to make informed decisions when it comes to REIT investments.


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What Are REITs?
Real Estate Investment Trusts (REITs) are investment vehicles that provide individuals with the opportunity to invest in real estate-related assets without actually owning, operating, or managing physical properties. REITs were created by the U.S. Congress in 1960 to make real estate investments more accessible to the general public. To qualify as a REIT, a company must meet certain criteria established by tax law, including:

-Invest at least 75% of its total assets in real estate.
Generate at least 75% of its gross income from rents, mortgage interest, or real property sales.
-Distribute at least 90% of its taxable income to shareholders in the form of dividends.
-These requirements make REITs unique from other investment options and allow them to enjoy certain tax advantages, such as not paying corporate income tax at the entity level.

How Do REITs Work?
REITs operate by pooling capital from multiple investors to acquire, manage, and develop a diversified portfolio of…