REITs or real estate investment trusts are companies that own or operate income-producing real estate, such as retail buildings, warehouses, apartments, data centres, infrastructure or hotels. A REIT can focus on one type of real estate property or cover a mix of properties in their portfolio.
This type of investment asset can provide retail investors with a great way to diversify their portfolios and invest in residential or commercial real estate without the hassle of buying and managing the properties themselves.
They can provide steady dividend income. REITs have to pay out 90% of their profits in the form of dividends to their investors.
Due to their lower correlation with the rest of the equity market, they can help diversify your portfolio.
They are a much more liquid investment compared to investing directly in property.
REITs have the potential to provide total return on investment.
Like any other stock market investments their value can go down as well as up.
They can be massively impacted by real estate prices, which also tend to be correlated with the health of the economy.
Even if REITs are exempt from corporate income tax, investors still need to pay tax on dividends, if they are not kept in a tax wrapper.
Not suited for short term investment. REITs prices can be influenced by many factors over the short term - interest rates being one of these factors.
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