What is a REIT - REIT Primer - REIT Investing - Real Estate Investment Trust - REITs | Summary and Q&A

TL;DR

REITs are investment vehicles that allow smaller investors to invest in real estate properties and offer tax advantages, high dividends, and diversification opportunities.

Key Insights

• 🤑 REITs allow smaller investors to invest in real estate without large sums of money.
• ✋ The tax advantages of REITs result in higher dividends compared to stocks.
• 🔬 REITs can be categorized as equity REITs (investing in physical properties) or mortgage REITs (investing in mortgages and mortgage-backed securities).
• 🪐 Valuing REITs involves metrics like funds from operations (FFO), adjusted FFO, and net asset value (NAV).
• ♿ REITs can provide investors with diversification options and access to the real estate market.
• 🤨 However, stock issuance by REITs to raise capital may negatively impact shareholders.
• 🎏 REIT dividends are relatively stable, making them attractive for investors seeking a regular income stream.

Transcript

Hi I'm Jimmy in this video. We're going to look at real estate investment trusts or REITs for short. So we're gonna look at the basics of what a REIT is how they're set up how we can value them and then throughout the whole process we're going to mention a few quick examples just to illustrate how wide ranging this type of real estate investment ca... Read More

Questions & Answers

Q: What is a REIT and how do they provide access to real estate investments?

REIT stands for Real Estate Investment Trust and it allows investors to buy into a portfolio of real estate properties. Similar to buying stocks, investors can own a piece of a company that focuses on real estate investments.

Q: What are the tax advantages of investing in REITs?

REITs are not required to pay corporate income tax if they fulfill certain rules. They must pay out at least 90% of taxable profits to shareholders and have at least 75% of assets and gross income derived from real estate activities. This results in higher dividends for investors.

Q: What are the main classifications of REITs?

The two main classifications are equity REITs and mortgage REITs. Equity REITs invest in physical real estate properties, while mortgage REITs invest in mortgages and mortgage-backed securities.

Q: How can REITs be valued?

REITs can be valued using metrics like funds from operations (FFO) per share and price to FFO ratio. Adjusted funds from operations (AFFO) can also be used to calculate a REIT's value. Net asset value (NAV) is another method to estimate the worth of underlying real estate assets.

Summary & Key Takeaways

• REITs are investment vehicles that own and manage real estate properties such as apartment buildings, office buildings, shopping malls, and hotels.

• They provide smaller investors with access to larger real estate investments and offer tax advantages, resulting in higher dividends compared to most stocks.

• REITs can be classified as equity REITs (investing in hard assets) or mortgage REITs (investing in mortgages).