Real Estate Investment Trust (REIT)

Presented by:
Obodo- Elue Joseph
Financial Research Analyst
Money Africa 2022
What is a Real Estate Investment Trust
(REIT)
A real estate investment trust (REIT) is a company that owns, operates,
or finances income-generating real estate. - Investopedia

In other words REITS are companies that make investing on the real
estate market similar to mutual funds and the stock market. They do
this by allowing you buy a fraction of a real estate.

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 What qualifies as a REIT?
For an investment asset to qualify as a REIT, it must meet certain
criteria's, some of which are;
• The REIT leases space and collects rents on the properties, then
distributes that income as dividends to shareholders.
• Invest at least 75% of total assets in real estate, cash, or U.S.
Treasuries
• Derive at least 75% of gross income from rents, interest on
mortgages that finance real property, or real estate sales

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 Types of REITs
There are three types of REITs:

Equity REITs. Most REITs are equity REITs, which own and manage
income-producing real estate such as office buildings, apartments,
shopping complexes etc.
Revenues are generated are mainly through rents and not through the
reselling of properties.

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 Types of REITs
•Mortgage REITs. Mortgage REITs lend money to real estate owners
by creating mortgage packages and they make their money from the
earned income from the interest rate on the created mortgage.
Mortgage REITs are significantly impacted by interest rates.

•Hybrid REITs. These REITs combine both the equity and mortgage
REITs strategies. They make money from both the properties they own
and the mortgages they create.

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 Do REITs Pay Dividends?

By law and IRS regulation, REITs must pay out 90% or more of their
taxable profits to shareholders in the form of dividends.
REIT companies are often exempt from most corporate income tax but
their shareholders who receive dividends are taxed as if they are
ordinary dividends.

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Pros and Cons of REITs
Pros Cons

Diversification High Management Fees

Stable Cash flow Low growth

Transparency Dividends are taxed as regular income

Inflation Protection Sensitive to Interest Rate: Mortgage Risk

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 How do I invest in REITs?
To invest in REITs all you have to do is;
• Pick any investment app of your choice e.g Trove, Chaka, Bamboo etc
• Search for the REIT ticker you want to start investing in
• Start Investing

Some of examples of popular REITS are; Prologis, American Campus

Communities, Click Here For More

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 References

https://www.investopedia.com/terms/r/reit.asp
https://www.moneycrashers.com/real-estate-investment-trust-investing
-reits/
https://www.reit.com/what-reit/types-reits/guide-mortgage-reits