Getting into real estate is often considered a lucrative career. But you don’t have to buy and sell property to join this industry as a professional. You can enter a real estate investment trust (REIT) company or become a REIT investor.
Read on for information to consider when deciding whether real estate investment trusts are a good career path for professionals like you.
Real Estate Investment Trusts Explained
A real estate investment trust or REIT is a group of funds or securities for real estate. REIT management companies oversee the acquisitions, sales, and diversification of real estate.
Think of a REIT similar to a mutual or exchange-traded fund (ETF). With a mutual fund, several stocks or securities are pooled together. Investors can then buy mutual fund shares instead of individual shares in the fund itself.
Similarly, with a real estate investment trust, investors can purchase partial ownership or shares in the trust, thereby reaping the financial benefits of simultaneously investing in multiple real estate or other securities.
Through REITs, investors can invest in portions of projects or real estate and generate profit. Most real estate investment trusts are collections of properties such as hospitals, shopping malls, apartments, and other large properties rather than single-family homes, although this is only sometimes true.
Related: The Most Stable REIT to Buy During a Recession
Real estate investment trusts are often attractive to investors because they do not require those investors to finance, purchase, or manage any property themselves. Instead, REIT companies and their employees handle all the details.
What does a REIT company do?
A REIT company purchases real estate and securities for its clients. He monitors the market, sells properties when necessary, and continues to grow the trust raised and the portfolios under his control for the financial prosperity of his clients.
A REIT company is similar to a mutual fund manager. They keep track of their clients’ investment properties on a daily basis, in addition to distributing dividends to those clients every month.
REITs in more detail
Only some companies that invest in real estate qualify as REITs.
For a company to be a legitimate REIT, it must:
- Invest 75% or more of your total assets in real estate and US Treasury bonds for cash.
- Deriving 75% or more of your gross income from interest on mortgages, real estate sales, or rent payments.
- Pay at least 90% of your taxable income as shareholder dividends each tax year.
- Be a taxable corporation.
- Be managed by a board of trustees or directors.
- Have at least 100 shareholders or more after the first year of operations.
- Not have more than 50% of its shares owned by five or less people.
Related: 3 REITs that could be the backbone of your portfolio
Do REITs pay dividends to investors?
Yes, which is part of what makes them so desirable to investors. Both residential and diversified REITs pay monthly dividends to their shareholders and investors. This monthly income comes from the rent and mortgage payments of the people who own the properties in the REIT.
Most REITs have an average rate of return of around 10.5%, similar to the rental rate of return that owners can expect in their first few years of operation. Unlike homeowners, however, REIT investors don’t need to spend a lot of time and money maintaining or managing property.
Keep in mind that REIT managers or companies take a small commission from accrued rent and mortgage payments as the cost of their services. This is what real estate investment trust workers, their managers and other professionals are paid.
So should you get involved with real estate investment trusts?
That depends on your ambitions and career prospects. REIT management is a complex and even potentially risky field for many.
If you get into REITs, you’ll often have to start at the bottom and work your way to the top, so your salary may not be exceptional in the early years of your career. However, the potential rewards of sticking with this career for several years could be quite enticing.
You should consider participating in real estate investment trusts as a career if you:
- You are already interested in investing in real estate. Joining a REIT company might be the best way to learn about this unique investment field and how best to trade within it.
- You are interested in acquiring real estate and learning more about the real estate market.
- You have strong management skills.
- You are comfortable with a certain level of risk, not to yourself, of course, but to your clients.
What will you do in a REIT company?
That depends on your exact job title and responsibilities.
For most in the REIT industry, career paths begin with obtaining a position at the headquarters of a REIT company. You can start with essential maintenance or secretarial work, but gradually learn more about how a REIT company chooses its assets, communicates with its clients, and advertises its services to acquire new clients.
Real Estate Investment Trusts Career Paths
There are multiple potential career paths you can pursue in any REIT industry. These are just some examples.
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You could work as a property manager. Many REIT companies work with third-party property management companies. Simply put, property managers maintain rental properties, such as apartment complexes or multiple houses in the same neighborhood.
If you work for a property management company, you may eventually be able to work for a REIT. Alternatively, if you work for a REIT, you could work as a property manager for that trust. In this case, the trust is in charge of several rental properties, which it maintains and supervises on behalf of its clients.
You could also pursue a career as an asset manager. REIT asset managers decide what properties they must buy and how much debt they must take up in terms of loans or other financial arrangements to buy those properties.
Asset managers also oversee all aspects of owning and operating properties and ensuring that property expenses align with projections. This mid-level management job requires a lot of experience in real estate, investing, and similar areas.
Development executives are the chief executive officers of these funds. Therefore, they have a lot of influence regarding which properties the REIT buys, its earnings and debt targets, and how the fund performs.
Development executives identify opportunities to purchase new properties for the fund’s clients to enhance the financial prosperity of all involved.
This position pays well and is an excellent springboard for senior management positions with other companies in the real estate investment industry. However, expect to gain a lot of experience in the REIT field before qualifying for this position.
Acquisition analysts are closer to the entry-level or middle manager position than development executives. That being said, they are critical.
REIT acquisition analysts plan, implement, coordinate and identify properties to be acquired by the fund they work for. For example, they may find an attractive apartment complex that needs new investors, and then recommend that the REIT company buy it to further diversify the portfolio.
Related: 3 REITs to buy and hold for the long term
Because of this, acquisition analysts need skills and experience in the real estate investment industry. They need to know how to recognize and understand market trends, spot available properties, and know what properties are worth.
It is also beneficial to have contacts in the real estate or investment industries before applying for these positions with a REIT. For example, if you’re friends with local real estate agents, you can get an early scoop on your friends’ up-and-coming properties or new listings, allowing you to recommend properties to your REIT company or more quickly than other analysts.
Ultimately, you might enjoy working for a REIT company if you like investing, real estate, analytics, and the like. If you are successful in this field, you will also get a pretty fair salary.
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