How to invest in real estate without buying it

It is possible to invest in the real estate sector not only by purchasing “real concrete meters” or closed-end mutual funds. Investors can also invest in specialized real estate companies — REITs. We are starting a series of posts about this tool. Now we will tell you how REITs work and what is their peculiarity.

REITs allow any investor to invest in a portfolio of real estate assets in the same way they invest in other industries — through buying shares of individual companies or through an exchange-traded fund (ETF).

REIT investors receive a significant share of the company’s income. For comparison: the average dividend yield of S&P 500 stocks is about 2%, while for REITs it is twice that —

Why are REITs paying such high dividends? There are two reasons here:

As shown

REITs are included in the S&P 500 and Russell 2000 indices and account for about 3% and 8% of their market capitalization, respectively. There is also a separate index that tracks the dynamics of REIT — FTSE Nareit All Equity. In February 2020, according to

REITs of all types own more than

Not every company that invests in real estate can be called a REIT. To obtain this status, the foundation must

Why do companies agree to meet all these requirements in order to qualify themselves as a REIT?

REITs invest in various types of real estate, including offices, hotels, hospitals and infrastructure. However, first of all, all REITs are divided into equity (equity REIT) and mortgage (mortgage REIT or mREIT). There is a big difference between them:

There are also

Is there some more

REIT invests in different types of real estate. As a rule, a company specializes in one sector, however, it may hold several types of property in its portfolio, which is less common.

REITs traded on the exchange are usually attributed to one of the

The pandemic has had a major impact on the REIT:

Today, according to

As they think