Real Estate Investment Trusts have become the new buzzword for investing in real estate. In countries like the United States, where they were initially implemented, they have produced above-average returns. Real Estate Investment Trusts have become increasingly popular in recent years. More countries are now adopting REITs as an investment vehicle. This article will explain what Real Estate Investment Trusts are and why they offer a better way to invest in property than other legal structures.
Concept of Real Estate Investment Trusts
Real Estate Investment Trusts have introduced to the United States about five decades ago. Since then, the idea has gained tremendous market acceptance. Since then, REITs are no longer an alternative investment but have become popular.
The REIT concept is straightforward. These trusts allow investors to enjoy the benefits of diversification and the professional expertise and experience of fund managers. These trusts pool the money from many investors. They then use the money in this pool to buy long-term properties. Individual investors do not have to make a long-term investment. Real Estate Investment Trusts have a secondary marketplace. Any investor can sell their share to another investor in the market for the current price.
Real Estate Investment Trusts offer investors liquidity, often needing more when making real estate investments.
Real Estate Investment Trusts are a business.
REITs use the money they collect to invest in real estate. It would be wrong to assume Real Estate Investment Trusts were only secondary investments in real estate. Real Estate Investment Trusts are similar to businesses.
If two Real Estate Investment Trusts receive the same amount of money and are managed differently, they can have different returns. Even if they were given the same properties to work, their returns would be very different. The returns of Real Estate Investment Trusts are more dependent on the management style and expertise than any other factor. A share of Real Estate Investment Trusts is the same as a company’s share.
Real Estate Investment Trusts began in the United States in 1960 as amateur investments. The REIT Act was signed into existence by President Eisenhower. The goal was to allow the average investor to invest in commercial property. Before REITs, such investments were available only to large financial institutions and wealthy individuals. The masses can now access the same assets with the introduction of REITs!
In the United States, the idea of Real Estate Investment Trusts became very popular as many laws were passed to ensure the efficient operation of these trusts. It was so popular that it spread around the world. Real Estate Investment Trusts have been adopted by many countries, including Malaysia, Australia, and Hong Kong, as well as developing nations such as Ghana.
The industry of Real Estate Investment Trusts has undergone a significant change. When the industry was first created, trusts would purchase any property. They would buy commercial office space and malls or even residential properties with multiple properties. Over time, however, the industry realized that each investment has a different risk-reward profile. Companies started to specialize in certain types of property. In their investment brochure, Real Estate Investment Trusts will only state which kind of property they invest in. Investors have greater control over how their money is invested.
The short-term future of Real Estate Investment Trusts is currently considered harmful. The Fed is about announcing its QE program. All asset classes are expected to be affected by QE tapering. Real estate will be the most brutal hit. Real estate was the origin of the crisis that led to QE and tapering.
In the coming years, Real Estate Investment Trusts is expected to experience a period of turmoil. The long-term outlook for real estate is positive. Real Estate Investment Trusts (REITs) are among the best ways to invest in real estate. Therefore, the outlook for REITs in the long-term seems optimistic.