A real estate investment trust (REIT) is a type of company that either owns, manages, or provides funding for real estate properties that generate income.

REITs are similar to mutual funds and enable individual investors to earn dividends from real estate without the responsibilities of buying, managing, or financing properties themselves by pooling the capital of many investors.

REIT Offices

The best way to think about REITs is that they give you an easy hassle-free way of owning a little portion of real estate without the trouble of maintaining real estate. You’re simple like a silent partner. REITs invest in different types of real estate properties including offices, apartment buildings, warehouses, retail centers, medical facilities, data centers, cell towers, infrastructure, and hotels. However, while some real estate investment trusts may have a mix of portfolio properties, many of them concentrate on a specific type of property.

Typical REITs are divided by either their operation/access type or by their industry affiliations.

Are All REITs considered equity REITs?

Most REITs that exist are equity REITs, which are publicly traded and either own or operate income-producing real estate. When the market and Nareit mention REITs, they’re usually referring to equity REITs specifically. This is good news if you are a casual investor buying shares on eToro or other online platforms.

What are the other operation models of REITs?

  • Public non-listed REITs are REITs that are registered with the SEC but are not listed or traded on national stock exchanges.
  • Private REITs are investment opportunities that do not need to be registered with the SEC and whose shares are not traded on national stock exchanges.

What are the industry-affiliated types of REITs?

Office REITs

Office REITs are companies that own and manage office buildings which they rent out to tenants. These buildings can be of different types ranging from skyscrapers to office parks. Some office real estate investment trusts specialize in certain markets such as suburban areas or central business districts. Others focus on renting to specific tenants such as biotech firms or government agencies.

Industrial REITs

Industrial REITs are companies that own and manage industrial facilities. These facilities are rented out to tenants. Some industrial REITs specialize in properties like warehouses and distribution centers. Other Industrial REITs will specialize in factories and other heavy industry settings. They are a critical part of the e-commerce industry and help satisfy the growing need for fast delivery.

Industrial REITs - Builders at work

Retail REITs

Retail REITs are companies that own and manage real estate used for retail purposes. Next time you drive to your local mall, think about who actually owns the premises. They rent out this space to tenants. Different types of retail REITs focus on specific types of properties like large regional malls, outlet centers, grocery-anchored shopping centers, and power centers with big box retailers.

Residential REITs

Residential REITs are companies that own and manage different types of residential properties, and rent those properties to tenants. They include REITs that specialize in apartment buildings, HMOs, student housing, manufactured homes, and single-family homes. Some residential REITs also focus on specific geographical markets or classes of properties within these market segments. They say residential REITs is the easiest entry into the market and also the steadiest one – there will always be demand for residential rentals.

Data Center REITs

Data center Real Estate Investment Trusts (REITs) are companies that own and manage facilities where customers can store their data safely. These companies offer various products and services to ensure the safety of servers and data, including providing uninterruptible power supplies, air-cooled chillers, and physical security measures.

Diversified REITs

Diversified REITs are companies that possess and oversee a mixture of real estate properties and collect rental fees from occupants. To illustrate, these companies may have a combination of commercial and industrial property portfolios, which would be beneficial for investors seeking to diversify their exposure to different real estate asset categories.

Timberland REITs

Timberland real estate investment trusts are companies that own and manage real estate properties with forests. Their main focus is on harvesting and selling timber from these forests. The key to thinking about REITs is that it can work for any type of real estate – not just office buildings.

Farming REITs

Not all farmers or ranchers own their farms or ranchos. Sometimes it makes more sense to simply rent the land as it simplifies operation. Farming REITs own and manage farmland and work with farmers to maximise their income. Specifically in North America, a large number of Farming REITs will manage bulk land that is used to produce Ethanol and Biodiesel. It’s a great alternative investment for people who don’t want to invest into energy stocks.

Healthcare REITs

Healthcare REITs are companies that own and manage real estate related to health care. They receive rent from tenants who use their properties, which include senior living facilities, hospitals, medical office buildings, and skilled nursing facilities. As a business model it is relatively safe because Healthcare REIT tenants are usually governmental or council entities which pretty much guarantee them a steady source of income, unlike the unpredictable private sector.

Self-storage REITs

Self-storage real estate investment trusts (REITs) are companies that own and operate storage facilities for which customers pay rent. These facilities are rented out to both individuals and businesses. With apartment square footage steadily decreasing, demand for self-storage increases year over year.

Infrastructure REITs

Infrastructure REITs are companies that own and manage real estate related to infrastructure, and they get paid rent from tenants who use those facilities. Some examples of infrastructure properties owned by these REITs are electrical distribution units, fiber cables, wireless infrastructure, cell phone towers, and energy pipelines.

Specialty REITs

Specialty REITs are companies that own and manage a variety of properties, collecting rent from tenants. They focus on properties that don’t fall under traditional real estate investment trust categories, such as movie theaters, night clubs, casinos, and outdoor advertising sites.

Mortgage REITs

Mortgage REITs generate income by buying or creating mortgages and mortgage-backed securities. They provide financing for real estate that produces income and earn money through the interest on mortgage investments. This company offers financing options for income-producing real estate through buying or creating mortgages and mortgage-backed securities. They generate earnings from the interest on these investments.

Holiday REITs

Holiday REITs are companies that own and operate hotels and resorts. It’s AirBnB but on steroids. They offer rental space within their properties to guests. Lodging REITs own various types of hotels that differ in service level and amenities provided. Their properties cater to a broad range of clients, including both business and leisure travelers.

These are just some of the types of REITs that investors can choose to invest in. It is important to note that REITs may also be categorized into different types based on their geographic location, industry sector or asset class. This gives investors more flexibility when choosing an investment strategy and diversifying their portfolio. Ultimately, potential returns should be weighed against the risks associated with each type of REIT. Investing in REITs can provide lucrative returns, but it is important to understand all aspects of the investment before committing capital. With careful consideration and analysis, investors can identify the best opportunity for their portfolios.