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What is REIT?
You may have heard of a real estate investment trust (REIT) but might not understand the different types available to you. To review, a REIT is a way to invest in real estate without buying and managing a property. REITs allow investors to invest in commercial properties already generating income and partake in that income without worrying about managing the property. What most people don’t understand is that there are three types of REIT’s, each offering their own risks and benefits. The first REIT is an equity REIT. Equity REITs typically own and operate the income-producing real estate available to investors. The second type is mortgage REITs, unlike equity REITs, these provide money directly in the form of a loan or mortgage. Mortgage REITs usually use more borrowed capital that equity REITs. The third category of a REIT available to investors is the hybrid. This is exactly what it sounds like, a combination of a mortgage and equity REIT. There are different benefits and risks involved in all three REITs depending on your situation as an investor. It is a good idea to know exactly what is available to you to help you make the most educated decision.
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