REITs, Explained Simply

A simple guide to investing in real estate without owning property directly.

If you like the idea of real estate investing but not the idea of fixing toilets or finding tenants, you are not alone - that is exactly the gap REITs were built to fill. This guide breaks down who this is for, how much money you actually need, and how REITs generate returns.

Who Is This For?

REITs are worth exploring if any of the following sound like you:

  • You want real estate exposure without managing tenants or property maintenance
  • You have limited capital and want to invest in real estate without a full down payment
  • You want income-generating investments as part of a diversified portfolio
  • You want the ability to buy or sell your real estate investment quickly, if needed

Whether you are new to investing or already own property directly, REITs offer a simpler way to add real estate to your portfolio.

How Much Money Do You Need to Get Started?

Far less than buying property directly, but here is a general sense of what to know.

Publicly Traded REITs

These trade like stocks, so you can typically start with whatever you would invest in any other stock or fund - no full down payment required.

Non-Traded and Private REITs

Some non-public REITs set higher minimum investments and are less liquid, so it is worth confirming the type before investing.

Common Types of REITs

  • Equity REITs - Own and operate income-producing properties directly, generating returns primarily through rental income.
  • Mortgage REITs - Finance real estate by lending money or purchasing mortgages, earning returns from the interest.
  • Publicly Traded REITs - Bought and sold on stock exchanges, offering the most liquidity and easiest access for individual investors.
  • Non-Traded REITs - Not listed on public exchanges, typically offering less liquidity in exchange for potentially different return profiles.

How REITs Generate Returns

Rental Income Distributions

Most of a REIT's rental income is distributed directly to shareholders as dividends.

Property Appreciation

As the underlying properties increase in value, the REIT's share price can rise as well.

Diversification Across Properties

A single REIT often owns dozens or hundreds of properties, spreading risk across many buildings and tenants.

Liquidity

Publicly traded REITs can typically be bought or sold on any trading day, unlike a physical property.

What You'll Need to Get Started

  • A brokerage account, if investing in a publicly traded REIT
  • A general sense of how much you want to invest
  • Your comfort level with publicly traded versus non-traded options
  • An understanding of your own timeline and liquidity needs

What You Can Expect From Us

  • A clear explanation of the different types of REITs available
  • Help understanding how a REIT compares to owning property directly
  • Guidance on how REITs might fit into your broader investment portfolio
  • Honest information about liquidity and risk for each REIT type

A Realistic Starting Point

Getting started with REITs usually follows a similar arc - here is a general sense of how it often goes.

A Realistic Starting Point:

Step 1 - Open a brokerage account, if you do not already have one

Step 2 - Compare publicly traded REITs across property types

Step 3 - Invest an amount that fits your broader portfolio strategy

Ongoing - Review dividend distributions and performance periodically

Advantages

  • Real estate exposure without managing tenants or property maintenance
  • Regular income distributions from rental profits
  • Instant diversification across many properties in a single investment
  • Far more liquidity than owning physical property directly

Things to Keep in Mind

REITs are one of the more approachable ways to invest in real estate, but a few details are worth knowing upfront:

  • Publicly traded REITs can fluctuate in value like stocks, sometimes independent of the actual real estate market.
  • Non-traded REITs can be harder to sell quickly if you need access to your money.
  • Dividend distributions are generally taxed differently than qualified stock dividends.

Is This Right for You?

If real estate has appealed to you but the hands-on side has not, REITs offer a way to get real estate exposure without the day-to-day responsibilities.

Our team can help you understand your REIT options and how they might fit into your broader investment strategy.