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Joe Diamond, CPA, CFP®, EA, MST


Diamond Financial Corporation

4256 North Arlington Heights Road, Suite 204

Arlington Heights, IL 60004


Phone: 847-884-8500 




July/August 2020

Real Estate Investment Trusts

Woman reading REIT Portfolios book.

Real estate has always been a way for investors to grab a personal piece of the American Dream — their own homes — but it may also prove to be a smart addition to your investing strategy while potentially providing a steady stream of income. A publicly traded Real Estate Investment Trust (REIT)* offers one way to invest in this asset class, which includes varied commercial and personal real estate.

What’s a REIT?
A Real Estate Investment Trust (REIT) must organize as a corporation, trust, or association managed by at least one trustee or director, and it must include transferable shares held by 100 or more persons, among other requirements.

Through a REIT, investors buy shares of properties like office buildings, hotels, warehouses and shopping centers — something that would be cost-prohibitive for many investors without the scale a REIT provides. Other REITs may include consumer housing rentals and mortgages. REIT shareholders don’t have to manage the daily upkeep of these properties as they would if they owned these or any properties directly.

Don’t confuse REITs that trade on public exchanges with non-traded REITs and private real estate funds. The latter type of real estate investment is not subject to the same extensive rules that govern REITs, and their shares often will not be as liquid as REIT shares.

Part of the Picture
Often considered a fourth asset class (along with stocks, bonds and money markets), many REITs have high liquidity because they trade on public exchanges. They must return 90% of their income to shareholders as dividends, and they’re subject to many of the rules other publicly traded investments must follow. While REITs provide a way to diversify among asset classes, they may also offer diversification** within the asset class. For instance, a REIT may include commercial and residential properties that vary by type, geographic location and income expectations.

Before investing in a REIT, you need to understand whether or not it is publicly traded, and how this could affect the benefits and risks to you. Ask your investment professional for more information about REITs.

*REITs involve risks such as refinancing, economic conditions in the real estate industry, change in property values, dependency on real estate management and other risks associated with a portfolio that concentrates its investments in one sector or geographic region. Shares of any REIT are not suitable for all investors.
**Diversification does not ensure a profit or protect against loss in a declining market. Past performance won't guarantee future results.


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