Real estate has consistently been known as a reliable investment, offering income and capital appreciation. However, owning physical properties can be costly and time-consuming, and Real Estate Investment Trusts (REITs) simplify the process.
The U.S. Congress created REITs in 1960 to allow everyday investors to access income-producing commercial real estate without purchasing or handling properties directly.
What Are REITs?
According to the Meta Partners Tokyo Japan review, a REIT is a company that owns, operates, or finances income-generating real estate. To qualify as a REIT, a company must meet specific criteria, such as distributing at least 90% of its taxable income to shareholders as dividends. In exchange for these payouts, REITs are exempt from paying corporate income tax, making them an attractive investment vehicle for income-seeking investors.
REITs own office buildings, shopping malls, apartments, hotels, hospitals, data centers, farms, and other properties. REITs allow investors to gain income share from these properties without the hassle of being a landlord.
Types of REITs
Real Estate Investment Trusts (REITs) present a diverse way to put money into real estate without directly owning property. There are three primary REIT types, each with its revenue-generating approach. Equity REITs own and manage income-producing properties such as shopping centers and office buildings, earning money through rent.
These are the three primary REITs types:
Equity REITs – acquire and manage income-producing real estate, such as shopping centers, office buildings, and apartment complexes. They generate revenue primarily through rent.
Mortgage REITs (mREITs) – instead of owning real estate, mortgage REITs finance by buying or deriving mortgages and mortgage-backed securities. The loan interests generate their income.
Hybrid REITs – combine aspects of mortgage and equity REITs by investing in real estate properties and real estate-backed loans.
REITs can also be categorized by how they are accessed, ranging from publicly traded REITs available on major stock exchanges to private REITs exclusively for high-net-worth individuals.
REITs can also be classified by how they are accessed:
Publicly traded REITs – bought and sold like stocks on major exchanges, offering easy liquidity.
Public non-traded REITs – available through financial advisors like Meta Partners Tokyo Japan but not traded on exchanges.
Private REITs – only open to high-net-worth individuals and not available to the general public.
How to Get Started with REITs
Investing in REITs is simple. You can buy publicly traded REIT shares through any brokerage account or financial firm like Meta Partners Tokyo Japan, just as you would with stocks. You can invest in REIT-focused mutual funds or exchange-traded funds (ETFs) if you want broader exposure. Public non-traded REITs can be purchased through a financial advisor, though they often have higher minimum investments.
REITs offer a unique opportunity to generate passive income, diversify your portfolio, and gain exposure to the real estate market without the need to manage physical properties. By understanding the REIT types and weighing the pros and cons, you can make informed decisions and add a new income stream to your investment strategy.