Is Real Estate Investment Trusts a Good Career Path?
October 14, 2022
If you're interested in working in real estate, you might wonder, "is real estate investment trusts a good career path?"
It can be for the right person. Real estate investment trusts have opened up many opportunities in the real estate market. Knowing which jobs are the best paying can help you create the most profitable career path.
Is Real Estate Investment Trusts a Good Career Path?
If you have an interest in real estate and don't want the stress of owning real estate investments yourself, you might wonder if REITs are a good career path for you.
The answer is that working in real estate investment trusts can be a great career path. There are many opportunities within the industry for beginners and experts, allowing everyone to enjoy the real estate industry's success.
The Ins and Outs of Real Estate Investment Trusts
Before you work in a real estate investment trust, it's important to know what they are and how they work so you can see what you'll deal with daily.
Real Estate Investment Types
Real estate investment trusts mostly purchase commercial properties, rent them out, maintain them, and sell them. REITs share the monthly profits as dividends and the capital gains earned when they sell the property.
There are many types of real estate investments that you should understand if you want to get involved in a real estate career path.
Rental properties are usually single-family homes, townhomes, or condos that investors buy and rent to families. The real estate owners collect monthly rent and, in exchange, manage the property. Real estate investors can manage the property themselves or hire a property manager to do it for them. Real estate investment trusts typically don't include residential rental properties, but they are a big part of the real estate market.
Some investors prefer to buy undervalued real estate properties, fix them, and flip them. When investors flip properties, they aim to buy at a low price and sell for a profit. However, the profit depends on the cost of renovating the property to increase its value.
Most real estate flippers keep properties for less than six months to decrease their holding costs. As a result, flipped properties usually aren't included in real estate investment trusts.
Wholesalers don't take possession of investment properties. Instead, they find the real estate deals, go under contract on the sale, but then assign the sales contract to an investor in their network.
A wholesaler is a third party, bringing together sellers and investors. Many investors use this opportunity to save time and find the best real estate deals.
Commercial real estate refers to businesses, like shopping malls, office buildings, medical facilities, and apartment buildings, that individuals or companies buy, operate, and then sell. Commercial real estate is more expensive and more out of reach for many investors, but because it's income-generating real estate, it has higher returns. As a result, commercial real estate is often included in real estate investment trusts.
REIT (Real Estate Investment Types)
Commercial properties are what real estate investment trusts focus on and are an investment most retail investors can't afford. Commercial real estate costs much more money and isn't easily leveraged like residential real estate.
REITs invest in commercial real estate using crowdfunded investments from its investors. They use the real estate investment funds to buy, maintain, and operate properties, paying investors dividends throughout the investment.
Real Estate Investment Trust Categories
Within every real estate investment trust, there are several categories investors can choose to invest in.
Equity real estate investment trusts are the investments real estate investment companies buy, rent out, and maintain. For example, if they buy an office building, they hold onto it, rent it to business customers, collect rent, and maintain the property.
When the real estate company feels the investment has run its course, they sell the property, sharing the capital gains with investors of the REIT. Throughout the investment term, they also share the rental income earned.
Mortgage real estate investment trusts don't invest in a property directly. Instead, they invest in the debt side of real estate investments. They are the lender, providing the funds for real estate developers to build and sell properties.
The regular income comes from interest, and each investor earns their initial investment back when the loan is paid in full.
Hybrid real estate investment trusts invest in equity and mortgage REITs. This gives investors the best of both worlds by diversifying in equity and debt positions.
Within real estate investment trusts, there are many roles to improve your real estate career path.
Property managers maintain properties for the investors. They screen and choose tenants, make repairs and renovations, collect rent, deal with tenant issues, and eventually help sell the property.
Property developers take raw land and turn it into something profitable. They develop the properties, whether residential or commercial buildings, and sell them for a profit within real estate investment trusts.
Real Estate Agent
The real estate agent has an important role in real estate investment trusts. They help buy and sell property, ensuring that the real estate company's best interests are followed.
Asset managers crunch numbers, determine if a purchase is good, and evaluate how much debt the real estate company will get into to purchase the property. They have the best interest of the real estate company and its investors in mind when making important decisions.
Acquisition managers look for deals, negotiate prices, and evaluate deals to ensure they are a good addition to a real estate investment trust. They look at market fluctuations and trends and assess potential properties to see if they are conducive to the REIT's mission.
An investment analyst looks at each purchase or sale to determine how it will affect the real estate investment trusts' overall returns. They are responsible for helping the company make profitable decisions for everyone.
Investor relations specialists work closely with investors to maintain a good working relationship. They also ensure that all investors are 100% informed and feel confident in the investment opportunities.
5 Benefits of Investing in Real Estate Investment Trusts
Investing in real estate investment trusts has many benefits, including the following.
1. Diversification and Portfolios
You can invest in real estate without using all your capital and get a diversified portfolio focusing on many aspects of the real estate industry. Real estate investment trusts are automatically diversified for investors.
2. Avoiding Tenant Responsibility
You aren't responsible for tenant management when you don't own the real estate yourself. That's the job of the people working within the REIT. Your only job is to invest money and collect dividends in real estate investment trusts.
3. Benefits on Taxes
Real estate investment trusts have tax benefits because they are a part of the real estate business. Always talk with your tax advisor to determine your investment's tax laws.
4. Regulation and Transparency
Real estate investment trusts must be 100% transparent and highly regulated. So you don't have to worry about getting taken advantage of or losing your money to a scam.
5. Liquidity Perks
Publicly listed securities are liquid. Therefore, you can trade them during open market hours, giving you the liquidity you need in an emergency.
Making Money With REITs
Real estate investment trusts make money from the revenues earned through rental or interest income, depending on the type of investment opportunities in the REIT. The revenues are paid as dividends, and REITs must share at least 90% of their company's profits.
The shares you buy give you partial ownership of the real estate company. The number of shares you own determines the percentage of the earnings you'll receive.
Becoming Rich or Risking It All
Since no investment is 100% foolproof, there's always a chance you could lose everything. But there's also a chance you could become rich. Most people fall somewhere in between the two when investing in REITs.
Rules and Requirements for Managing REITs
There must be at least 100 shareholders, and one shareholder cannot own more than 50% of the real estate company.
REITs must pay at least 90% of their taxable income to shareholders, but most pay 100% for the tax treatment.
REITs must earn at least 75% of their gross income from real estate investments.
At least 75% of the REIT's assets must be invested in real estate. However, it can also be invested in cash or treasuries.
Are REITs Suitable for Everyone?
REITs, like any investment fund, are not for everyone. So first, decide if you're interested in real estate investments. Next, determine your risk tolerance and timeline to ensure real estate investing fits your needs and what you can handle.
How Much Money Is Needed to Invest in REITs?
You don't need a lot of money to invest in REITs. While some are reserved for accredited investors and have high minimum investment requirements, others allow you to invest with as little as $10.
How Risky Are REITs Compared to Stocks?
REITs and investments in the stock market have similar risks. REITs are traded on the stock exchange, so they are as liquid as stocks but also have an interest rate risk. Interest rates increasing too much can hurt the real estate industry and investors' earnings.
How Can Doctors Benefit From REITs in the Long Run?
Doctors are diversifying their income efforts by investing in real estate. Since most doctors are busy, they don't have time to maintain and manage properties to invest in them directly, but they can benefit from REITs, which give all the benefits of investing in REITs without the work.
Which REIT Positions Are the Highest Paying?
Many REIT positions are high-paying, but the highest-paying jobs are real estate developers, analysts, and agents.
Is Real Estate Investment Trusts a Good Career Path: The Bottom Line
Real estate investment trusts offer many benefits, whether you're investing or looking for a job in the real estate industry. If you are wondering,”is real estate investment trusts a good career path for me?” the answer is usually yes. However, like any job, you should consider the pros and cons to decide if it's right for you.
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