A REITs is a real estate investment trust, a trust company that owns and manages income-producing commercial real estate. It represents the world’s most advanced real estate productivity.
The idea behind a REIT is that a company manages the investment and operating activities of the fund and charges shareholders a management fee; and that company generally takes the money to buy or invest in real estate projects.
When properly managed, these real estate investments generate a cash flow return. After deducting the associated costs, REITs regularly pay dividends to shareholders.
Of course, since it’s an investment, there will always be risks, and investing in REITs is also possible to result in losses.
Simply put, a REIT is a company that provides money to a professional real estate operator and shares the money with them.
Here is an example:
The government has announced plans to develop a desert island over the next five years, with a focus on tourism.
As an investor, Jack thought: with the development of production and construction, more and more tourists could come to the island to spend money and play. At that time, if you build a five-star hotel with a marine theme, you can make a lot of money. But the initial investment in the hotel is too high, and when it is finished, you need to find someone to manage the hotel.
What is to be done? Company B advertises, that they will build the hotel, get it up and running and share the profits with their investors. So Jack invests $100,000 in Company B.
A year later, the hotel opens and makes $30 million in revenue in its first year with many visitors. Jack was very happy with his $50,000 return. Here Jack invests in REITs. He gives the money to Company B to invest in real estate-related businesses and eventually makes a profit.
