![]() REIT ETFs track REIT equity indexes so you can profit from the return of entire property markets rather than bet the farm on a few real estate companies. REIT ETFs offer the same benefits as other types of ETF: a simple, transparent, affordable way to invest in a tradeable basket of securities. ![]() The REIT requirement to pass on 90% of profits as dividends, plus the fact that many sign up tenants on long-term leases, makes REITs a useful source of income. REITs are also widely used by investors interested in high dividend yields. What’s more, you don’t need to become an expert in planning, financing, developing and maintaining property when you can outsource all that to a REIT’s management team.īy including REITs in your asset allocation, you can reduce the risk attached to your portfolio by the means of diversification. You can also invest in a globally diversified REIT ETF for £50 as opposed to the millions you’d need to buy into a single, gleaming London tower. Their structure has forced some to cap redemptions during times of stress, locking in investors because the company couldn’t liquidate its holdings quickly enough.Īs pooled investment vehicles, REITs have the financial firepower to invest in multiple properties, whereas small investors are forced to place all their bets on a single property in a single market if they invest directly. Illiquidity has often been a problem for even the listed property company vehicles. That makes REITs highly liquid in comparison to single properties that can take an age to buy or sell - as any homeowner can testify. REITs can be publicly listed and traded on the stock market just like other exchange-traded securities. Why are REITs better than investing directly in property? Mortgage REITs provide mortgages for property owners or buy mortgage-backed securities (MBS), while Hybrid REITs mix and match the two approaches. Most of the REITs are known as equity REITS and invest directly in their properties. For example, some REITs focus on self-storage, or doctor’s surgeries, or small business units. Some are large with highly diversified portfolios while others specialise in a particular type of real estate. As a result, the majority of old school UK property companies (by value) have converted to REITs according to the British Property Federation.Īs with equity funds, there are different types of REITs. For example, UK REITs don’t pay corporation tax or capital gains tax on their property investments, unlike less efficient, older vehicles such as property companies and Property Unit Trusts. In exchange, REITs benefit from a benign tax regime. In the UK, the property rental business must include at least 3 properties and no single property may account for more than 40% of the same.Have no more than 50% of its shares held by 5 or fewer shareholders.Pay out at least 90% of taxable income as dividends to shareholders.Earn at least 75% of profits from property rent, interest on mortgages or from property sales.Invest at least 75% of its assets in property.Qualifying criteria for REIT status varies by territory but generally, a company must: The UK turned up a little late to the game, passing REIT legislation in 2007. REITs are an internationally recognised investment vehicle, first established in the US in 1960, with the goal to widen participation in real estate as an asset class. They typically focus on commercial property (shopping malls, hotels, office blocks etc) rather than residential, they are tradeable on the stock exchange, and they pool investors’ cash in diversified holdings - think of them as the equivalent of mutual funds for real estate. Real Estate Investment Trusts (REITs) are companies that directly own, operate or finance income-producing property.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |