The Three Basic Types of REIT

Directly investing in real estate often necessitate shelling out a huge sum of money, which makes it inaccessible to many investors. Real Estate Investment Trusts (REITs) is an instrument or security that gives investors opportunities to put money in properties or mortgages.

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It is similar to a mutual fund wherein capital is raised from large and small investors, which, in turn, is used to purchase real estate assets through major exchanges.

These three are the basic types of REITs:

Equity REIT

According to Market Realist, 90 percent of all types of REITs are equity REITs. This type invests in and owns, and sometimes, operates, income-generating real estate assets of a wide variety, including residential, retail, industrial, health care, and office properties. The major source of revenue for equity REITs are rent and lease payments, which are then distributed as dividends to shareholders.

Mortgage REIT

Mortgage REITs, also called mREITs, use pooled funds from the investors to loan money directly to real estate owners, landlords, or operators. There are also mREITs that lend for acquisitions of loan or purchase mortgage-backed securities. Investors will be able to earn from the net interest margin of these loans.

Hybrid REIT

Not yet that common in the market today, hybrid REITs is an investment strategy that aims to own both physical properties and mortgages. While investors in this instrument can diversify their portfolio, finding the right balance has proven to be difficult.

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Independent consultant and financial expert Bharti Jogia-Sattar had previously worked in the real estate sector, and one of her competencies is management of REITs. Read more about her by visiting this page.