A Beginner’s Guide To Real Estate Investment Trusts

According to estimated research, about 70 million people make investments of different real estate investment trusts Australia. However, this number of people is not going to decrease, it is only going to increase with the growing industry.

So, for those who want to invest in these shares for the first time, they need to follow some rules before making any adjustments. It is important for beginners to first know how the investment industry works and what is better for them. Hiring a consultant will also do you good, but if you can be guided properly by some other resource, then that is much better.

What is a REIT?

REIT is a real estate investment trust organization that helps dealers to make investments and help them own properties which play a huge role in generating income. The investors buy the shares from the REIT, and the money given to the REIT is used for making more and more investments. So, income is earned by the REIT by renting the payments.

How does a REIT work?

The reason that makes REITs so unique is that they are supposed to follow a set of rules to meet up with the qualifications of the REIT.

When a REIT meets the qualifications, then a reward for them is that they will not have to pay taxes on the company level. Taxes are only paid by the individual investors related to the bonuses they receive.

But, when and why is this important? The meaning of this is that no double taxation is required for the property; it means that the investor can be able to keep a specific portion of the required income stream and be able to earn more money.

Types of REITs

REITs are of many different types. However, the REITs are defined with how the investors want to use them. Following are its types.

  • Public vs. Private REITs

Public REITs are exactly like public companies, they are listed on stock exchanges. However, the public non-traded REITs are not listed on the public exchanges, but they are recorded with the SEC. The private REITs, on the other hand, are not recorded with SEC or even listed. 

  • Equity vs. Mortgage REITs

There are different natures of investments, which include: debt or equity/ mortgages. Most of the REITs are usually equity REITs; they are supposed to participate in the operation, development of commercial real estate properties, and ownership. On the other hand, the mortgage REITs possesses huge pools of real estate liability, and they make their earnings from the interest payments from this liability.

The equity REITs select the strategies that are based on the amount of work required to take the investments to a higher level, in order to produce money. So, in other words, if the workload required is in a large quantity, then the opportunity is big, but the risks are higher. These investment strategies are all dependent on the kind of work demanded by the investor.