Understanding REITs: Real Estate Investment Made Liquid

08/12/2016 | by

Real estate always has been a key allocation in investment portfolios but, prior to the advent of stock exchange-listed REITs, it meant making an investment in an illiquid asset. Stock exchange-listed REITs combine the investment benefits of real estate with the benefits of a liquid market, which has become progressively more so. The average daily dollar trading volume of the U.S. listed REIT market in July was $7.1 billion, up from $4.2 billion five years earlier in July 2011, and $2.0 billion in July 2006.

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What's a REIT?

REITs, or real estate investment trusts, are companies that own or finance income-producing real estate across a range of property sectors. These real estate companies have to meet a number of requirements to qualify as REITs. Most REITs trade on major stock exchanges, and they offer a number of benefits to investors.

Why Invest in REITs

REITs historically have delivered competitive total returns, based on high, steady dividend income and long-term capital appreciation. Their comparatively low correlation with other assets also makes them an excellent portfolio diversifier that can help reduce overall portfolio risk and increase returns. These are the characteristics of real estate investment.

About Nareit

Nareit serves as the worldwide representative voice for REITs and real estate companies with an interest in U.S. real estate. Nareit’s members are REITs and other real estate companies throughout the world that own, operate, and finance income-producing real estate, as well as those firms and individuals who advise, study, and service those businesses.