A Beginner’s Guide to REITs

REITs pic

Image: investopedia.com

Based in New Orleans, Louisiana, Equitas Capital Advisors, LLC engineers financial solutions to meet the investment needs of its investors who include corporations, endowments, foundations, and family offices. A full range consultancy, Equitas Capital Advisors, LLC offers its clients financial advice on investment options such as Real Estate Investment Trusts (REITs).

A REIT is a security where investors, both large and small, invest in real estate properties or mortgages, without having to look for the property individually or finance the entire property. It is an investment method where investors pool resources together and purchase shares in real estate properties such as malls, office complexes, hospitals, timber lands, hotels, or even warehouses.

There are two main types of REITs: equity REITs, which invest in real estate properties such as malls and commercial buildings then receive income in the form of rent or profit on sale, and mortgage REITs, which pool resources at low interest rates then invest in mortgages or mortgage-backed securities paying high interest rates, receiving income in the form of net interest margins.

Today, REITs play a significant role in the US economy given that REIT-owned properties are in every state and the securities support about 1.8 million US jobs. Part of the reason REITs have grown in popularity since their inception in 1960 is because they can be traded in the stock exchange just like shares in a company. This is very attractive to investors who want to own real estate but are worried about liquidity. Another reason is that REITs are required to pay out almost all their taxable income to shareholders as dividends, making them very attractive to investors seeking good income flow.


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