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Real Estate Investment Trusts, or REITs, are an increasingly popular investment option for those wishing to diversify their portfolios. REITs allow investors to invest in real estate without actually owning or managing the property. Instead, they own shares of a company that owns and manages real estate properties. In this article, we will provide a beginner’s guide to REITs, including what they are, how they work, and the potential benefits and risks associated with investing in them.
REITs are companies that own and operate income-generating real estate properties. They were created by the United States Congress in 1960 to give small investors the opportunity to invest in large-scale, income-producing real estate. REITs are required to distribute at least 90% of their taxable income to shareholders as dividends, which makes them attractive to income-seeking investors. They can be publicly traded on major stock exchanges, or they can be private, non-traded entities.
REITs own and manage various types of income-producing real estate, such as office buildings, shopping centers, hotels, and apartment complexes, among others. They generate income by renting out space in their properties and may also earn capital gains by buying and selling properties. REITs are divided into two categories: equity REITs and mortgage REITs.
Equity REITs, which are the more common type, own and manage income-generating properties and earn income from rent and property appreciation.
Mortgage REITs invest in mortgages and other types of real estate debt. They earn income from the interest paid on these mortgages and other loans.
REITs can be a good investment option for those seeking to diversify their portfolios and earn income from real estate investments. However, like any investment, they come with risks and should be carefully evaluated before investing. It’s important to do your research and seek the advice of a financial professional before making any investment decisions.
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