Real Estate Investment Trusts (REIT’s) are a great way for people with little money to basically get started in Real Estate Investing. REIT’s are publicly held companies, and are known for their high dividend yields, and stable stock performances. In order to invest in REIT’s, you just have to purchase shares of their stock.
REIT’s that own real estate are known as Equity REIT’s. They own properties such as office buildings, malls, laboratories, residential houses, apartment buildings, etc. ALL REIT’s are required by the IRS to pay out 93% of their net income to the stock holders in the form of dividends. Because they pay out 93% of their net income, the income of the REIT is not taxed. However, the individual stockholder who receives the dividend is then taxed. REIT’s have typical dividend yields of 8 to 13%. This means that for every dollar you invest in an REIT, you’ll receive between .08 cents and .13 cents a year in the form of dividends. Most of the income from an Equity REIT is in the form of Rent.
There is another form of REIT where they don’t own any properties. This type of REIT is called a Mortgage REIT. Mortgage REIT’s loan money to owners of real estate in the form of mortgages, or they buy existing mortgages or invest in mortgage backed securities. Mortgage REIT’s make money off of the interest from the loans.
A third type of REIT is a Hybrid REIT. This type of REIT owns properties, and also invest in mortgages, and mortgage securities.
To find a good REIT to invest in, Do a Google search for “REIT Companies”. Order the annual reports of the companies that you find, and analyze their financial health. Then, buy stock in that company through your favorite broker. Some REIT’s allow you to invest in them with a broker. My personal favorite REIT is Annaly Mortgage. They trade under the ticker symbol NLY.