Real Estate Investment Trust (REIT): How it Works?

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Real Estate Investment Trust (REIT): How it Works?


Hey there, fellow readers! Have you ever wondered how people invest in real estate without buying a whole building or property? Well, let me tell you about a cool thing called Real Estate Investment Trust, or REIT for short. It's like a magic trick that allows people to invest in real estate and earn money without actually owning any property. Isn't that amazing? So, let's dive into the world of REITs and see how they work!

What is a REIT?

Okay, so first things first. What exactly is a REIT? Well, a Real Estate Investment Trust is a special kind of company that owns, operates, or finances income-generating real estate. It's like a big group of investors who pool their money together to buy different types of properties, like apartments, offices, hotels, or even shopping malls. And guess what? We can be a part of this group too! By investing in a REIT, we can become a shareholder and own a small piece of those big properties.

Types of REITs:

Now, let's talk about the different types of REITs. There are three main types: equity REITs, mortgage REITs, and hybrid REITs. Equity REITs are the most common ones. They own and manage properties to generate rental income. Mortgage REITs, on the other hand, provide loans to real estate owners and earn money through the interest they receive. Hybrid REITs, as the name suggests, combine the features of both equity and mortgage REITs. They invest in properties and also provide loans. Isn't it fascinating how REITs have different ways to make money?

How do REITs make money?

Now, let's understand how REITs make money and how we, as shareholders, can earn a part of it. REITs primarily make money through rental income. They buy properties and lease them to tenants, like businesses or individuals, who pay rent. This rental income is then distributed among the shareholders as dividends. So, if we invest in a REIT, we can earn money through those dividends too. Isn't it like getting a share of the rent from big properties?

Benefits of Investing in REITs:

Investing in REITs has some great advantages. First, we can invest in real estate without actually buying a property. That means we don't have to worry about things like property maintenance or dealing with tenants. Second, REITs are required by law to distribute at least 90% of their taxable income to shareholders as dividends. So, we can enjoy a steady stream of income from our investments. Lastly, since REITs are traded on stock exchanges, we can easily buy or sell our shares whenever we want. Investing in REITs can bring even more advantages for us as young investors. Firstly, REITs give us a chance to learn about the real estate market and how it works. We can gain valuable knowledge about property management, rental incomes, and market trends. Secondly, by investing in REITs, we can start building our financial future from an early age. It teaches us the importance of saving and investing money wisely. Lastly, REITs often invest in big, popular properties that we may have dreamt of visiting one day. So, by investing, we can say we own a small piece of those amazing places. How cool is that?


So, my dear friends, investing in Real Estate Investment Trusts (REITs) is an exciting way to be a part of the real estate world without actually owning property. By investing in a REIT, we become shareholders and can earn money through rental income and dividends. Isn't it cool? So, let's explore the world of REITs and make our money work for us. Happy investing, everyone!

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