What Are REITs?

You May Not Be A Homeowner, But REITs Can Make You A Real Estate Investor.

For many in their 20s, burdened with student loan debt while living in high-cost cities, purchasing a home is simply not a possibility. However, that doesn’t mean they can’t get invested in real estate now.

Real estate investment trusts (REITs) are the answer. Their structure is comparable to that of a mutual fund, but they trade on stock exchanges like your  favorite stocks. And they invest only in real estate.

Investing in real estate investment trusts (REITs) can help diversify your portfolio and reduce the importance of a specific sector or asset class over time, especially in the near term. We should all strive to have diverse portfolios that are consistent with our risk tolerance and time frame.

REITs can be classified into three categories: equity, mortgage, and a mix of the two. Equity REITs invest your money in actual real estate (eg, large apartment complexes), whereas mortgage REITs lend money to people who own or manage property.

REITs are appealing for their dividend payouts: They must distribute at least 90% of their income as dividends (and some pay 100%). Because REITs are largely exempt from corporate taxes, less tax equals more profit, which equals more money in investors' pockets.

While you won't be able to call yourself a homeowner, you will be able to call yourself a real estate investor if you invest in REITs.


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