What is a REIT?

• REIT — which rhymes with “sweet” — stands for real estate investment trust, and its appeal among investors looking to diversify their portfolio beyond publicly listed firm stocks or mutual funds is expanding
• REITs are corporations that hold (and frequently run) income-generating real estates such as apartments, warehouses, self-storage facilities, shopping malls, and hotels
• Their appeal is straightforward: the most dependable REITS have a track record of paying out significant and growing dividends
• However, the risks associated with that potential for growth differ depending on the type of REIT

Types of k

1 . Equity REITs

• Equity REITs act similarly to landlords
• They hold the underlying real estate, maintain and reinvest in it, and collect rent checks — all the management chores that come with owning a property

2. Mortgage REITs

• Mortgage REITs (also known as mREITs) do not own the underlying property, unlike equity REITs
• Instead, they possess debt securities secured by real estate
• For example, if a family obtains a mortgage on a home, this sort of REIT may purchase the mortgage from the original lender and collect the monthly payments over time
• Meanwhile, someone else — in this case, the family — owns and operates the property
• Mortgage REITs are often riskier than stock REITs, although they pay out greater dividends

3. Hybrid REITs

• Hybrid REITs are a hybrid of equity and mortgage REITs
• These companies own and run real estate properties, as well as commercial property mortgages
• To understand the REIT’s core emphasis, see the prospectus

4. Publicly traded REITs

• Publicly traded REITs, as the name implies, are traded on an exchange alongside stocks and ETFs and can be purchased with a standard brokerage account
• According to the National Association of Real Estate Investment Trusts, or Nareit, there are more than 200 publicly-traded REITs on the market
• REITs that are publicly listed have higher governance standards and are more transparent
• They also have the most liquid shares, which means that investors may easily acquire and sell the REIT’s stock — considerably faster, for example, than investing in and selling a retail property themselves
• For these reasons, many investors only purchase and sell publicly-traded REITs

5. Public non-traded REITs

• These REITs are registered with the SEC but not traded on a stock exchange
• Instead, they can be purchased from an online real estate broker that participates in public non-traded offerings, such as Fundrise
• According to the Financial Industry Regulatory Authority, because they are not publicly traded, these REITs are highly illiquid, frequently for durations of eight years or more
• Non-traded REITs can also be difficult to appraise
• The SEC advises that these REITs frequently do not evaluate their value for investors until 18 months after their offering ends, which might be years after you’ve invested
• Investors can buy shares in public non-traded REITs using a variety of online trading platforms, including Modiv, the Diversy Fund and Realty Mogul

6. Private REITs

• These REITs are not just unlisted, making them difficult to evaluate and trade, but they are also generally excluded from SEC registration
• As a result, private REITs have fewer transparency requirements, which may make evaluating their performance more difficult
• These restrictions make these REITs less appealing to many investors, and they come with added risks
• Public non-traded REITs and private REITs may also have greater account minimums — $25,000 or more — and higher fees than publicly-traded REITs
• As a result, private REITs and many non-traded REITs are only available to accredited investors with a net worth of $1 million or more, or a yearly income of at least $200,000 if single or $300,000 if married in the previous two years

REFERENCE
1. https://www.nerdwallet.com/article/investing/reit-investing

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