The Different Types of REITs

The Different Types of REITs

Different Types of REITs

Introduction

Situasi IDTo learn more about REITs, read this article on the different types of REITs. This article will provide you with the information you need to make an informed decision about whether to invest in REITs. Real estate investment trusts (REITs) are companies that own and operate income-producing real estate. They offer investors the opportunity to invest in real estate without the hassle of direct ownership. There are three main types of REITs: equity REITs, mortgage REITs, and hybrid REITs.

What is a REIT?

A REIT is a company that owns and operates income-producing real estate. REITs are required to pay out at least 90% of their taxable income to shareholders in the form of dividends. This makes them an attractive option for investors who are looking for income.

Benefits of Investing in REITs

There are several benefits to investing in REITs, including:

  • Diversification: REITs can help investors diversify their portfolios by providing exposure to the real estate market.
  • Income: REITs are required to pay out at least 90% of their taxable income to shareholders in the form of dividends. This makes them an attractive option for investors who are looking for income.
  • Potential for capital appreciation: The value of REIT shares can increase over time, providing investors with the potential for capital appreciation.
  • Liquidity: REITs are traded on major stock exchanges, making them relatively liquid.

Types of REITs

There are three main types of REITs:

1. Equity REITs

  • Equity REITs own and operate income-producing real estate.
  • They generate income from rent and property sales.
  • Equity REITs are the most common type of REIT.
  • They make up about 70% of the REIT market.
  • Some examples of equity REITs include:
    • Prologis (PLD)
    • Equinix (EQIX)
    • Realty Income (O)

2. Mortgage REITs

  • Mortgage REITs invest in mortgages and mortgage-backed securities.
  • They generate income from interest payments on mortgages.
  • Mortgage REITs are more sensitive to interest rate changes than equity REITs.
  • They make up about 20% of the REIT market.
  • Some examples of mortgage REITs include:
    • Annaly Capital Management (NLY)
    • AGNC Investment Corp. (AGNC)
    • Starwood Mortgage Capital (STWD)

3. Hybrid REITs

  • Hybrid REITs combine characteristics of equity and mortgage REITs.
  • They invest in both real estate and mortgages.
  • Hybrid REITs offer investors a more diversified portfolio than equity or mortgage REITs.
  • They make up about 10% of the REIT market.
  • Some examples of hybrid REITs include:
    • Rithm Capital (RITM)
    • Ares Dynamic Allocation Fund (ARDC)
    • Two Harbors Investment Corp. (TWO)

How to Choose a REIT

When choosing a REIT, there are several factors to consider, including:

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