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Overview of real estate investment trusts

On Behalf of | May 17, 2016 | Real Estate Transactions

Many Delaware residents think that they can’t afford to get into commercial real estate investing because they don’t have the capital to purchase a property outright. Smaller investors often turn to the stock market because it’s seen as the easiest way to share in the profits of a large company.

There is another type of investment that may provide them with the best of both worlds. Real estate investment trusts allow people to purchase shares in a commercial real estate business without investing their entire savings. Like stocks, REIT shares provide dividends to investors and can be sold once they have appreciated in value. Investors can purchase REIT shares for a variety of different kinds of real estate such as office space, apartments, shopping malls and casinos.

REITs came into being in 1960 after Congressional legislation was signed by President Dwight Eisenhower. Over the years, their popularity has grown significantly. The total market cap for REITs went from nearly $90 billion in 1996 to around $940 billion by the end of 2015. REITs usually offer investors higher returns than stocks, and they must distribute at least 90 percent of their income to owners of their shares. REIT dividends have grown faster than the rate of inflation during 18 of the last 20 years.

REITs may be a profitable investment for an individual or a business strategy. They have been used by hotel companies that wish to spin off some existing properties, and attorneys who have experience with these types of real estate transactions can provide advice and counsel to clients that are thinking about such a strategy.