REITs What Are They? Why? Or Why Not?
REIT stands for Real Estate Investment Trust. It’s pronunciation rhymes with ‘meat’. It is a structure formed for investors to invest in real estate, but the REIT structure allows them to do so much as they would invest in mutual funds in order to buy stocks. The resources are pooled and diversified. REITs can be publicly or privately held and an investor owns one or more shares of the REIT. And it, like everything else, has its pros and cons.
PROs
Firstly, like mutual funds, when your money is pooled with other people in groups, you are somewhat protected from most major catastrophes and the usually bumpy ride of the regular market. You can also get involved in projects that are otherwise completely out of reach of you financially and have a virtually hands-off investment.
CONS
You are not in control of your investing vehicle at all. Robert Kiyosaki equates it to driving a car without your hands on the wheel. You put your money in and trust on the reputation (or sales materials) of the REIT. Also, REITs are known to often over-pay for investments simply because they can and don’t take the time to research and negotiate as an individual would.
If you’re really interested in pursuing this route, I recommend reading “Investing in REITs” by Ralph Block.
