A Real Estate Investment Trust (REIT) is a company that own or finances the income production in real estate sector. This is modelled after mutual funds and allows everyone to invest in portfolios of large scale properties the same way they invest in other industries through purchase of stocks. The stockholders of REITs earn a share of the income produced through real estate investment. Publicly traded REITs offer investors the benefits of commercial real estate investment along with advantages of investing in publicly traded stock.
Most REITs operate along a straightforward and easily understandable business model. By increasing rents and property occupancy over time, higher levels of income may be produced. REITs in other countries have demonstrated a historical track record giving good income and long term share price appreciation, inflation protection and prudent diversification for investors. So REITs financial benefits can be sum totaled under the following headings:
Diversification- Increased return; reduced risk
Inflation Protection- Natural Inflation Hedge.
Liquidity- Portfolio rebalancing [Read more…]