You don’t need to buy a house or manage tenants to get into real estate investing. If you’ve been curious about investing in property but aren’t ready for the hands-on commitment, Real Estate Investment Trusts (REITs) might be the perfect solution.
What Is a REIT?
A REIT (pronounced “reet”) is a company that owns, operates, or finances income-producing real estate. These companies pool money from multiple investors to purchase properties like apartment complexes, office buildings, shopping centers, or even hospitals and warehouses.
When you invest in a REIT, you’re essentially buying shares in a company that makes money from real estate—and you earn returns through dividends and potential stock appreciation.
Why Invest in a REIT?
REITs are a great option for those who want to dip into real estate without the hassle of owning physical property. There’s no need to handle repairs, find tenants, or worry about property management. Instead, you can invest the same way you’d buy stocks or mutual funds—often with much lower upfront costs.
Other benefits include:
- Liquidity: Unlike physical real estate, many REITs are traded on major stock exchanges, so you can buy or sell your shares easily.
- Diversification: REITs often invest in multiple properties across different markets, helping you spread out risk.
- Passive Income: Most REITs are required by law to return at least 90% of their taxable income to shareholders, making them a consistent source of dividends.
Types of REITs
There are a few different types of REITs to consider:
- Equity REITs: These invest in and own properties, earning money through rent and property value increases.
- Mortgage REITs (mREITs): These invest in real estate debt (like mortgages) and earn income from interest.
- Hybrid REITs: A mix of both property ownership and mortgage investments.
You can invest in REITs through a brokerage account, retirement fund, or REIT-specific mutual fund or ETF.
Things to Keep in Mind
While REITs are more accessible than buying property outright, they still come with risks. Market conditions, interest rates, and economic shifts can affect performance. It’s a good idea to do your research or talk with a financial advisor to find the right REIT for your goals.
A Smart Entry into Real Estate
If you’re ready to get involved in real estate but aren’t quite ready to buy your first property, REITs offer a smart, low-barrier way to start. They’re flexible, passive, and ideal for investors who want real estate exposure without becoming landlords.