In the wake of the disastrous real estate market crash of 2008, it was inevitable that at some point the market would rebound. Recently, investors have once again begun dipping their toes back into the market, buoyed by still-low interest rates. However, some investors may be put off by the idea of large investments for fear that another bubble may be forming only to lead to another crash. So how can a casual investor take advantage of an improving real estate market without taking on the high levels of risk associated with purchasing? The answer may be a Real Estate Investment Trust (REIT).
A REIT is a company, trust, or association that is jointly owned by at least 100 people, which owns (and in many cases operates) income producing real estate. In exchange for favorable tax treatment, the REIT agrees to distribute 90% of its taxable profits as dividends. A REIT operates much the same way a mutual fund provides for investment in stocks. This can be an attractive way for investors to make a low-cost investment in real estate.
REITs are sold like stocks and may consist of various types of real estate ranging from apartment buildings and shopping centers to billboards and cell towers. For those looking to make a low risk investment in a burgeoning real estate market, they may be a good place to start.
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