What is a REIT and How do they work?
Let’s start with the basics:
REITs stands for ‘Real Estate Investment Trusts’.
These are essentially property companies that are listed on the stock market.
So how do they work?
Step 1: An individual decides to invest in a REIT company.
Step 2: The money is then collected into a large pool (like all trusts).
Step 3: The pooled money is then invested into the property that the company either owns, operates or finances.
Step 4: Over time the company starts to make revenue and profit.
Step 5: The profits are then accounted and collected.
Step 6: The profits are then distributed in parts to the initial investors who
helped finance the company through a REIT.
Sounds great in theory…
But in reality, there is always a catch…
And that catch is timing.
The Big five SA Reits have lost over R100bn in value since 2018.
The BIG five REITs are:
Of course, this could be seen as an opportunity but there are several other factors we need to consider before deciding the best time to trade this type of asset.
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