Real estate is one of the most popular and profitable investment options in the world. However, buying and managing properties can be costly and time-consuming. That’s why many investors choose to invest in real estate investment trusts (REITs) instead. A REIT is a company that owns and operates income-producing properties such as office buildings, shopping malls, apartments, hotels, and more. By buying shares of a REIT, you can earn dividends from the rental income or capital gains of these properties without having to deal with the hassles of ownership. In this article, we will explore what REITs are, how they work, and how many jobs Opportunities are in real estate investment trusts.
What are Real Estate Investment Trusts?
Real estate investment trusts (REITs) are companies that own and operate income-producing real estate such as office buildings, shopping malls, apartments, hotels, and more. By buying shares of a REIT, you can earn dividends from the rental income or capital gains of these properties without having to deal with the hassles of ownership.
REITs, like mutual funds, combine the cash of several investors and invest it in a diverse portfolio of assets. However, unlike mutual funds, REITs are required by law to pay out at least 90% of their taxable income to shareholders as dividends. This makes REITs attractive for income-seeking investors who want to benefit from the steady cash flow and potential appreciation of real estate.
There are different types of REITs that specialize in different sectors of the real estate market. In this article, we will discuss some of the most common types of REITs and how to invest in them.
Types of REITs
REITs can be classified by the type of assets they own, the way they are traded, and the sector they focus on. Here are some of the main types of REITs:
The most popular kind of REITs are equity REITs. They own and operate income-producing properties such as office buildings, shopping malls, apartments, hotels, and more. They generate income from the rent they charge tenants, as well as from selling properties that appreciate in value. Equity REITs account for about 90% of all REIT investments in the U.S.2
Equity REITs can further be divided into different sectors based on the type of properties they own. Several of the most well-liked sectors are:
- Retail REITs: These REITs own and operate shopping centers, malls, and freestanding retail properties. They generate income from the rent they charge tenants, such as department stores, grocery stores, and restaurants. Retail REITs account for about 24% of REIT investments in the U.S.
- Residential REITs: These REITs own and operate residential properties such as apartments, condominiums, single-family homes, and manufactured housing. They generate income from the rent they charge residents, as well as from selling properties that appreciate in value. Residential REITs account for about 16% of REIT investments in the U.S.
- Office REITs: These REITs own and operate office buildings and business parks. They generate income from the rent they charge tenants, such as corporations, law firms, and government agencies. Office REITs account for about 14% of REIT investments in the U.S.
- Industrial REITs: These REITs own and operate industrial properties such as warehouses, distribution centers, data centers, and logistics facilities. They generate income from the rent they charge tenants, such as e-commerce companies, manufacturers, and transportation providers. Industrial REITs account for about 11% of REIT investments in the U.S.
- Healthcare REITs: These REITs own and operate healthcare properties such as hospitals, medical offices, nursing homes, and senior living facilities. They generate income from the rent they charge tenants.
- Hotel REITs: These REITs own and operate hotels and resorts. They generate income from the rent they charge guests, as well as from other services such as food and beverage, parking, and entertainment. Hotel REITs account for about 6% of REIT investments in the U.S.
- Specialty REITs: These REITs own and operate properties that do not fit into any of the above categories. They include properties such as casinos, theaters, golf courses, prisons, cell towers, timberlands, and infrastructure assets. Specialty REITs account for about 19% of REIT investments in the U.S.
Mortgage REITs (mREITs) are different types of REITs that do not own real estate but finance real estate instead. They invest in mortgages or mortgage-backed securities (MBS) that are tied to commercial and/or residential properties. They generate income from the interest they earn on their investments. Mortgage REITs account for about 10% of all REIT investments in the U.S.
Mortgage REITs can be classified into two types based on the type of mortgages they invest in:
- Agency mREITs: These mREITs invest in mortgages or MBS that are guaranteed by government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac. These mortgages have a lower risk of default, but also a lower interest rate. Agency mREITs account for about 70% of all mREIT investments in the U.S.
- Non-agency mREITs: These mREITs invest in mortgages or MBS that are not guaranteed by GSEs. These mortgages have a higher risk of default, but also a higher interest rate. Non-agency mREITs account for about 30% of all mREIT investments in the U.S.
Hybrid REITs are a mix of equity and mortgage REITs.They own and operate income-producing properties as well as invest in mortgages or MBS. They make money via rent and interest. Hybrid REITs account for a small percentage of all REIT investments in the U.S.
How do Real Estate Investment Trusts Work?
REITs can provide investors with a steady income stream, diversification, and exposure to the real estate sector without having to buy or manage any properties themselves.
How REITs Work
REITs were established by Congress in 1960 as a way to make commercial real estate investing more accessible and affordable for individual investors. To qualify as a REIT, a company must meet certain criteria, such as:
- At least 75% of the company’s assets must be put into either cash, real estate, or U.S. Treasury bonds.
- Derive at least 75% of its gross income from rents, interest on mortgages, or real estate sales
- Pay out at least 90% of its taxable income as dividends to shareholders
- Have at least 100 shareholders and be managed by a board of directors or trustees
- Be taxable as a corporation
Most REITs are publicly traded on major stock exchanges, which means they can be easily bought and sold like stocks. However, some REITs are privately held or non-traded, which means they are not listed on any exchange and have less liquidity and transparency.
REITs invest in various types of real estate properties, such as apartment buildings, office towers, shopping malls, hotels, hospitals, data centers, cell towers, and warehouses. Some REITs specialize in a single property type or geographic area, while others diversify across multiple sectors and regions.
REITs earn income from the rents they collect from tenants, the fees they charge for managing or leasing properties, the interest they receive from lending money to real estate owners or developers, or the capital gains they realize from selling properties.
REITs distribute most of their income as dividends to shareholders, who pay taxes on them at their individual income tax rates. REIT dividends are usually classified as ordinary income, which means they are taxed at higher rates than qualified dividends from stocks. However, some REIT dividends may be partially or fully qualified depending on the source of income and the holding period of the shares
How to Invest in REITs
There are different ways to invest in REITs depending on your preferences and goals. Among the most popular methods are:
- Publicly traded REITs: These are REITs that are listed on major stock exchanges such as the New York Stock Exchange (NYSE) or the Nasdaq. They are easy to buy and sell like any other stock, and they offer high liquidity and transparency. However, they are also subject to market volatility and fluctuations in share price.
- Public non-listed REITs (PNLRs): These are REITs that are registered with the Securities and Exchange Commission (SEC) but do not trade on stock exchanges. They are less liquid and transparent than publicly-traded REITs, but they may offer lower fees and more stable returns. However, they also have limited redemption options and may have higher risks of fraud or mismanagement.
- Private REITs: These are REITs that are not registered with the SEC and do not trade on any public market. They are only available to accredited investors who meet certain income or net worth criteria. They offer low liquidity and transparency, but they may also offer higher returns and lower correlation with the stock market. However, they also have high fees and risks of fraud or mismanagement.
To invest in any type of REIT, you need to open a brokerage account with a broker-dealer that offers access to these securities. You can then research different REIT options based on their performance, dividend yield, sector focus, fees, risks, and ratings. You can also use exchange-traded funds (ETFs) or mutual funds that track various indexes or baskets of REIT securities.
Available Job Categories in Real Estate Investment Trusts
There are numerous job opportunities in the real estate investment trust (REIT) sector. Here are the job descriptions for the available leading roles so you can understand this better:
An acquisition manager is responsible for identifying, evaluating, and negotiating potential real estate deals for a REIT. They conduct market research and analysis, perform due diligence and valuation, prepare financial models and projections, and present investment proposals to senior management and investors. An acquisition manager also coordinates with other departments and external parties, such as brokers, lawyers, lenders, appraisers, and consultants, to facilitate the closing of transactions.
According to Indeed.com, the national average salary for an acquisition manager in the U.S. was $86,513 per year as of May 2023.
A development manager oversees the planning, design, construction, and delivery of new real estate projects for a REIT. They manage the project budget, schedule, quality, and scope, and ensure compliance with relevant codes, regulations, and contracts. A development manager also coordinates with internal and external stakeholders, such as architects, engineers, contractors, consultants, tenants, lenders, and regulators, to ensure the successful completion of projects.
According to Indeed.com, the national average salary for a development manager in the U.S. was $97,443 per year as of May 2023.
An asset manager is responsible for maximizing the performance and value of a portfolio of real estate properties owned by a REIT. They develop and implement asset management strategies that align with the REIT’s objectives and market conditions. An asset manager also monitors and reports on the financial and operational performance of properties identifies and executes value-add opportunities, manages capital expenditure projects, oversees leasing activities and tenant relations, and supervises property managers and vendors.
According to Indeed.com, the national average salary for an asset manager in the U.S. was $98,061 per year as of May 2023.
Investor Relations Manager
An investor relations manager is responsible for communicating with current and potential investors of a REIT. They provide information and updates on the REIT’s performance, strategy, outlook, and governance. An investor relations manager also prepares and distributes investor materials, such as press releases, presentations, reports, and newsletters. They also organize and participate in investor events, such as conference calls, webinars, roadshows, and meetings. An investor relations manager also responds to investor inquiries and feedback and maintains relationships with analysts, media, and other stakeholders.
According to Indeed.com, the national average salary for an investor relations manager in the U.S. was $93,740 per year as of May 2023.
These are some of the types of jobs available in REITs. There are many other roles that contribute to the success of REITs, such as property managers, leasing agents, accountants, financial analysts, marketing managers, and more. Working in REITs can offer a rewarding career for those who are interested in the real estate industry and its various facets.
Jobs Opportunities are in Real Estate Investment Trusts?
According to some estimates, REIT businesses employ 308,000 people full-time, and directly support nearly 2.9 million full-time jobs in various sectors related to real estate. Moreover, the demand for REIT jobs is expected to grow by around 10% annually, as more investors seek to diversify their portfolios with real estate assets.
REIT jobs offer competitive salaries and opportunities for career advancement. Based on data from Indeed.com as of May 2021, the national average salaries for some of the common REIT roles are as follows:
- REIT analyst: $70,862 per year
- REIT accountant: $57,253 per year
- REIT manager: $97,443 per year
- REIT asset manager: $98,061 per year
- REIT property manager: $54,183 per year
These are just some examples of the types of jobs and salaries available in REITs. There may be other roles and pay ranges depending on the specific REIT and its location.
In the end, REITs are an important and growing sector of the real estate industry. They provide investors with a convenient and profitable way to invest in real estate without having to own or manage any properties themselves. They also create and support millions of jobs across various fields and functions related to real estate. REIT jobs offer competitive salaries and opportunities for career advancement. If you are interested in working in the real estate industry, you might want to consider a role in a REIT. You can find many job openings and apply online through websites like Indeed.com or LinkedIn. Working in a REIT can be a rewarding and fulfilling career choice for those who are passionate about real estate.
What are the employment opportunities in REITs?
REITs offer diverse and abundant employment opportunities. They employ and support millions of people in various real estate fields and functions. REIT jobs offer competitive salaries and career advancement. Working in REITs can expose you to different real estate sectors.
How many REIT sectors are there?
REITs are companies that invest in real estate in different ways. As far as its sectors, it has two main branches, some REITs buy and manage properties that generate income from rents, such as apartments, malls, hotels, or warehouses. These are called equity REITs. Other REITs provide loans to real estate owners or buy mortgages or securities backed by mortgages. These are called mortgage REITs.
What are the top 5 largest REITs?
- American Tower Corporation: This REIT owns and operates over 180,000 communication sites, such as cell towers, in 20 countries. The market value of it is $128.6 billion.
- Prologis: This REIT manages the world’s largest portfolio of logistics real estates, such as warehouses and distribution centers. It has a market capitalization of $96.9 billion.
- Equinix: This REIT owns and operates over 200 data centers across 25 countries. It has a market capitalization of $75.9 billion.
- Public Storage: This REIT is the largest owner and operator of self-storage facilities in the U.S. and Europe. It has a market capitalization of $53.8 billion.
- Digital Realty Trust: This REIT owns and operates over 280 data centers in 22 countries. It has a market capitalization of $42.7 billion.
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