A real estate investment trust is an investment vehicle that pools the capital of investors to invest in various forms of real estate, usually income producing assets that are structured to generate regular distributions of cash. Real Estate Investments Trusts, or (REIT’s), seek out investment opportunities and actively manage real estate assets. REIT investors are not directly investing in real estate property, but instead own REIT units that are publicly traded. As such, REITs are attractive to those investors who wish to participate in the real estate sector without the illiquidity of direct ownership.
In addition to providing relatively stable and predictable income, a portion of which is typically tax-deferred, REITs may also provide an inflation hedge as rental rates tend to move with inflation over the long-term. REITs also benefit from the positive leverage inherent in borrowing at rates that are lower than the returns which can be earned on income-producing properties.
Some of the benefits associated with non-traded REITs are:
- Preservation and protection of capital contributions
- Regular income from dividends paid
- Capital appreciation from underlying assets
- Professional management from experienced sponsors
- Tax benefits from real estate ownership