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The REIT
Before we get into the different types of REITs and the kinds that you’re most likely going to want to look at, let’s start by looking at what a REIT is. REIT is an acronym that stands for Real Estate Investment Trust, and is basically an investment pool used by groups. The REIT itself is formed by a group of people combining personal funds with each other, and then using those funds (the REIT) for their investments.
There are two criteria for which REITs are tested to ensure that they are actually eligible to be used as a valued investment tool. First, there need to be at least 100 different shareholders on the REIT itself, and 5 or less of them are not able to hold over 50% of the individual shares during the course of the previous 6 months. This takes a lot of organization into account, meaning that using the REIT as an investment plan is to be a well thought out process.
Getting involved in an already existing REIT isn’t difficult. You simply buy shares using your stock account. Profits made on the investment for which the REIT is used are divvied out to each of the investors involved, and dividends can be substantial.
As for the different types of REITs, the ones that would fit the criteria of the real estate investor looking to participate in smaller investment areas are Residential and Mortgage REITs. For those looking to take part in larger real estate investments, the Office, Healthcare, or Retail REITS may prove to be a better option.
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