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Real Estate Investment Trusts (REITs): A beginner's guide to investing in the real estate market
Real estate investment trusts (REITs) offer diversified property exposure.
Updated : Jan 17, 2023, 08:59 AM IST | Edited by : Raunak Jain
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Real estate investment trusts, or REITs, are a type of investment vehicle that allows individuals to invest in a diversified portfolio of real estate properties. These trusts are publicly traded on stock exchanges, similar to stocks and bonds, and are required by law to distribute at least 90% of their taxable income to shareholders in the form of dividends.
REITs can own and operate a variety of different types of real estate properties, including office buildings, shopping centers, apartment complexes, and hotels. These properties are often managed by professional property management companies, which allows investors to own a piece of the real estate market without having to deal with the day-to-day responsibilities of property management.
One of the main benefits of investing in REITs is that they offer a way for investors to gain exposure to the real estate market without having to purchase and manage physical properties themselves. This can be especially beneficial for those who are new to real estate investing or who do not have the time or resources to manage properties on their own.
Another benefit of REITs is that they offer a relatively stable source of income, since the majority of their income comes from rental payments and other property-related income. Additionally, REITs are required by law to distribute a significant portion of their income to shareholders in the form of dividends, which can provide a regular source of income for investors.
However, REITs also have some drawbacks. The value of REITs can fluctuate depending on the overall performance of the real estate market, and they may also be more volatile than other types of investments. Additionally, REITs can be affected by changes in interest rates, which can impact the value of their properties and the income they generate.
