What Is A REIT And How Does It Work?

REITs or real estate investment trust companies are corporations that own and operate real estate to generate income, manage portfolios and mortgages.

A house can be your safe haven or your ticket into the financial world of investment. How? Well, if you are on the brink of settling, you would invest and buy the house of your dreams, but if you want to earn and diversify your portfolio, you should rather tap the real estate market, aka REIT’s.

Investing in REITs is very similar to understanding how mutual funds work. Wherein multiple investors pool in their funds and invest towards the underlying asset. However, the asset isn’t equity, gold, or a combination of these but real estate holdings.

That means, from diversifying your portfolio exposure without the hassle of owning properties to regular income generation, investment in REIT, granted it is an emerging sector in India, is a profitable one for sure. Nevertheless, quite a few backdrops are ranging from fewer options available for investment which means there is less flexibility to diversify your portfolio among REITs.

REITs are a key consideration when constructing any equity or fixed-income portfolio. They provide greater diversification, potentially higher total returns, and/or lower overall risk. In short, their ability to generate dividend income along with capital appreciation makes them an excellent counterbalance to stocks, bonds, and cash.

But how does investing money in REITs generate returns for you? In simple terms, these corporations lease properties, collect rent and later distribute it among the shareholders as income and dividends.

Key takeaways

• Similar to Mutual Funds, REIT’s principal aim is to generate revenues and the long-term appreciation of assets.

• Investing in REITs as an investor can be an advantageous decision as they have high-quality rent-yielding properties, which in turn will lead to higher income and dividends.

• Investing in REITs can enable you to invest in a pool of real estate properties without having to own the physical property itself.

Real estate investment trusts are one of the best-performing asset classes available. Historically, investors looking for gains have performed better investing in real estate than fixed income.  A carefully constructed portfolio should consider both. REITs will continue to be an excellent addition to any diversified portfolio.

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Sachin Raturi is the Co Author Of International Bestselling And Award-Winning Book “The Growth Hacking Book 2”.

Sachin has been a considerable contributor and firmly collaborates with various global organizations and start-ups. He has been working with many connectors and influencers throughout the world. His central goal is always to inspire people, to help others in finding their passion to be successful. He is known as one of the super-connectors in society.