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They are usually set up to specialize in a specific sector or industry. From inner city dwellings to businesses to restaurants and more, REITs allow investors to put their money into a particular sector or housing accommodations.
REIT is that the law requires that 90% of its profits go to the shareholders in the form of dividends. That is an excellent thing to know and it promises that the vast majority of money made by a REIT will go to the people who incest in it, not the team or CEO behind it.
Something else to know is at least 75% of the total assets must be comprised of real estate and at least 75% of the company’s income must come from that rental portfolio.
More importantly, al lest 100 shareholder must be involved in the REIT with no more than 50% of the total shares held by five or fewer investors. This is one of the trickiest part of running a REIT because it can sometimes take a lot of work to drum up support from 1000 shareholders. But this is required by law and so many REITs never get off the ground.
The bottom line about the inner workings of a REIT is that instead of owning real estate, you instead own a share of the company that owns the real estate. It is like investing in company ad making money based on its performance instead of buying, owning, selling and managing your own properties.
If you believe in a company, why not let them make the money for you? That is the general principle behind REITs and it has worked very well for many people.
