Real Estate Investment Trusts

Owning investment property can be challenging and very rewarding at the same time. It takes a certain set of skills to handle all the accounting, property management, legal, insurance and other issues which arise from its possession. Some investors want the upside to owning real estate but do not want the potential downside. This leads us to discuss the Real Estate Investment Trust (REIT).

A REIT is a company that owns income producing real estate. It may contain apartments, commercial real estate or even shopping centres. If the company is publicly traded, its common or preferred shares are listed on a stock exchange and can be purchased through a registered investment advisor.

Sometimes, investors state that they own real estate whereas in fact they own shares in a REIT. In order to own real estate, you need to be on title (deed) and have legal counsel register you as such. This is a simple but key difference between owning securities and possessing investment real estate.

Rising Rates Hit REITs Hard

Several years of rock-bottom interest rates, fueled by the federal government, have had investors in a desperate search for yield. That was a plus for real estate investment trusts (REITs), which are required to pay 90 percent of their profits out in the form of dividends to investors. The minute rates began to rise, suddenly the darlings became the duds.

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