What are Real Estate Funds (REITs)?
Real Estate Funds are like “investor condominiums” that pool money to buy properties (malls, warehouses, offices) or securities from the real estate sector. You buy shares on the stock exchange and receive monthly rents.
How does it work?
- The fund buys properties with the money from the shareholders
- The properties are rented to companies
- The rents are distributed monthly to the shareholders
- Returns are exempt from income tax for individuals
Advantages
- Tax-free monthly income
- Invest in properties with little money (from $2)
- Diversification (a fund can have several properties)
- Liquidity (sell instantly on the stock exchange)
- No need to deal with tenants
Types of REITs
| Type | Example | Characteristic |
|---|---|---|
| Brick | REIT001 | Physical properties (warehouses) |
| Paper | REIT002 | Real estate debt securities |
| Hybrid | REIT003 | Mix of brick and paper |
| Fund of Funds | REIT004 | Fund that invests in other REITs |
How much does it yield?
The market average is 0.7% to 1% per month in returns. With $20,000 invested, you can receive $140-$200/month exempt from income tax.
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