Equity REITs (Real Estate Investment Trusts), which own and manage income-generating properties, appeal to investors looking to invest in income-producing properties, mainly in commercial real estate.
Real estate investors typically use publicly traded Equity REITs to get exposure to income-producing commercial and residential properties while seeking potential benefits such as dividend income and share price appreciation without direct ownership or management responsibilities.
However, returns are subject to market fluctuations, and neither income nor appreciation is guaranteed.
This article explores the concept of Equity REITs and how they compare to other real estate investment strategies.
Equity REITs operate as publicly or privately held companies that own, manage, or develop income-producing real estate properties, including apartments, office buildings, shopping centers, and industrial parks. REIT shares are investments that may receive dividend income and may benefit from potential share price appreciation.
Mortgage REITs differ from Equity REITs because they focus on real estate debt investments instead of owning physical properties to collect rental income.
The primary advantage of Equity REITs is their potential to generate dividends from investment income. The REIT structure requires these companies to distribute no less than 90% of their taxable annual income to their shareholders. The company structure often provides investors with consistent, periodic income.
The potential cash flow advantages of REITs appeal to real estate investors who manage properties because they eliminate the need to handle property management responsibilities.
When managed effectively, Equity REITs may enhance the value of their underlying real estate through capital improvements, efficient operations, and active asset management, which can contribute to stronger financial performance. However, outcomes are not guaranteed and will vary based on the REIT’s sector focus, management strategy, and broader market conditions.
Through Equity REITs, investors gain exposure to diverse property types alongside different locations and tenants, enabling them to spread their real estate investments across institutional-quality assets. Diversification benefits investors through risk reduction since owning multiple assets or managing properties in various locations lowers exposure to singular property risks.
Since they offer access to professional management through a diversified portfolio, REITs provide a solution for owners who want to exit their concentrated property holdings, including farmland or single-tenant buildings.
While Equity REITs provide a convenient route to earn passive real estate income, some investors use Delaware Statutory Trusts (DSTs) to get passive property ownership and 1031 Exchange eligibility for tax benefits.
Realized serves investment property owners through its Investment Property Wealth Management approach, which creates passive income streams based on your personal income needs and tax planning requirements.
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We will discuss how REITs, DSTs, and personalized portfolio selection can assist you in attaining your financial targets.
The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.