What is a REIT?

REITs or real estate investment trusts are companies that own or operate income-producing real estate, such as retail buildings, warehouses, apartments, data centres, infrastructure or hotels. A REIT can focus on one type of real estate property or cover a mix of properties in their portfolio.

This type of investment asset can provide retail investors with a great way to diversify their portfolios and invest in residential or commercial real estate without the hassle of buying and managing the properties themselves.

Advantages of REITs


  • They can provide regular dividend income. REITs have to pay out 90% of their profits in the form of dividends to their investors.

  • Due to their lower correlation with the rest of the equity market, they can help diversify your portfolio.

  • They are a much more liquid investment compared to investing directly in property.

  • REITs have the potential to provide total return on investment.

Disadvantages of REITs


  • Like any other stock market investments their value can go down as well as up.

  • They can be massively impacted by real estate prices, which also tend to be correlated with the health of the economy.

  • Even if REITs are exempt from corporate income tax, investors still need to pay tax on dividends, if they are not kept in a tax wrapper.

  • Not suited for short term investment. REITs prices can be influenced by many factors over the short term, interest rates being one of these factors.

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Types of REITs available to invest in

Equity REITs - These are the most popular type of REITs, and essentially act like a landlord. Their main revenue comes from rental income.
Mortgage REITs - These are REITs that invest in mortgages or mortgage-backed securities and generate their revenue from interest on their investments.
Retail REITs - They own or operate retail spaces, such as shopping malls, grocery stores or factory outlets.
Residential REITs - They own or operate residential spaces, such as apartments, student buildings or housing developments.
Healthcare REITs - They own or operate properties such as hospitals, care homes, medical offices or healthcare centres.
Office REITs - They own or operate properties such as office spaces, office parks or skyscrapers.
Industrial REITs - They own or operate properties such as industrial facilities, warehouses or distribution centres.
Infrastructure REITs - They own or operate properties such as energy pipelines, telecommunication towers or wireless infrastructure.

List of REITs on Freetrade

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