REIT Investors: Which Real Estate Sector Is Best? (2024)

FAQs

Who typically invests in REITs? ›

Because of the strong dividend income REITs provide, they are an important investment both for retirement savers and for retirees who require a continuing income stream to meet their living expenses.

REIT investors do not have a say in real estate property purchase or management decisions, which makes them a good fit for investors who don't have the time or expertise to do it on their own. For experienced investors, this structure may not be ideal as they may want more control over major investment decisions.

Direct real estate offers more tax breaks than REIT investments, and gives investors more control over decision making. Many REITs are publicly traded on exchanges, so they're easier to buy and sell than traditional real estate.

Equity REITs own or operate income-producing real estate. The market and Nareit often refer to equity REITs simply as REITs.

The five largest REITs in the United States are: American Tower Corporation, Prologis, Crown Castle International, Simon Property Group and Weyerhaeuser.

When investing only in REITs, individuals incur more risk than when they are part of a diversified portfolio. REITs can be sensitive to interest rates and may not be as tax-friendly as other investments.

How to Qualify as a REIT? To qualify as a REIT, a company must have the bulk of its assets and income connected to real estate investment and must distribute at least 90 percent of its taxable income to shareholders annually in the form of dividends.

Beneficial Owners are those individuals who ultimately (directly or indirectly) exercise substantial control over the Reporting Company or own or control 25% or more of the ownership interests in the Reporting Company.

Real estate investment trusts (REITs) (VNQ) have been among the worst-performing sectors since the Federal Reserve started raising interest rates aggressively in early 2022. Over that period until the beginning of November 2023, they had lost nearly one-third of their value on aggregate.

After looking at correlation patterns and historical data, it appears that returns from REITs vary during different interest rate periods, but for the most part have shown a positive correlation during increasing interest rates.

What is the average return of a REIT? ›

REITs are also attractive thanks to their market-beating returns. During the past 25 years, REITs have delivered an 11.4% annual return, crushing the S&P 500's 7.6% annualized total return in the same period.

One of the biggest benefits of REITs is their high-yield dividends. REITs are required to pay out 90% of taxable income to shareholders. Most REIT dividends don't meet the IRS definition of "qualified dividends."

The potential downsides, or CONS, of a REIT investment include the fact that they are taxed as income, the variation in the fee structures of different managers, and market volatility due to interest rate movements or trends in the real estate market.

REITs generate passive income primarily through leasing space and collecting rent on their properties. This rental income is the main source of revenue for REITs, and is then distributed to shareholders in the form of dividends. By law, REITs must pay out at least 90% of their taxable income to shareholders.

How do I Invest in a REIT? An individual may buy shares in a REIT, which is listed on major stock exchanges, just like any other public stock. Investors may also purchase shares in a REIT mutual fund or exchange-traded fund (ETF).

An individual may buy shares in a REIT, which is listed on major stock exchanges, just like any other public stock. Investors may also purchase shares in a REIT mutual fund or exchange-traded fund (ETF).

Blackstone has been on a REIT buying spree. Its leaders are self-made billionaires, and they talk highly about REITs.