Making the move into the field of real estate as a career choice is a daunting task. However, assisting families in purchasing and selling their homes is one of many methods to get into the real estate business. Let’s explore is real estate investment trusts a good career path for you!
Real Estate Investment Trusts (commonly called ‘REITs’) have seen a significant increase in popularity over time as an effective way for individuals who want to invest in real property without dealing with the daily challenges of managing property. If you need more clarification concerning the REIT career route, This article will provide the information required to make an informed choice.
What is a Real Estate Investment Trust (REIT)?
In simplest terms, the definition of a Real Estate Investment Trust (REIT) is a company that holds real estate and has shares that are traded publicly in the stock market. REITs are modeled on mutual funds and obtain their capital from various investors. Like owning company shares, the REIT lets multiple investors own a piece of a home and, in some cases, a property portfolio.
How Do Real Estate Investment Trusts Work?
REITs generally focus on a specific type of commercial real property. Specialized and diverse REITs, in contrast, can include a wide range of property types within their portfolios, like REITs with retail and office assets.
Many REITs have been listed on essential stock exchanges, and investors can buy and sell them as stocks at any point during the daytime trading. These REITs are considered to be highly liquid instruments and typically trade in huge quantities. This is because REIT shares are traded within a day, whereas actual property normally takes months to buy or sell.
Furthermore, REITs also have their setting requirements. The requirements may differ between states and from country to country.
A few U.S. requirements for REITs are as follows:
- A REIT should include at least 100 shareholders and investors.
- A REIT must be governed by an executive board and trustees with experience managing the company.
- REITs must be tax-exempt entities.
- A REIT can only have one individual who holds up to 50 per cent of its share capital.
- A REIT must be able to pay 90 per cent of its tax-deductible income distributed in dividends paid to shareholders.
- Less than 75 percent of REIT’s monetary funds should be invested into real estate, treasuries or cash.
- A minimum of 75 per cent of the REIT’s net income has to come through rent or sales (through real investment in real estate).
Types of Real Estate Investment Trusts in the Industry
Equity REITs: Earn revenue from the real estate that the REIT owns. One of the main characteristics that equity REITs possess is that their primary source of income is rents from real estate and not from the resale value of the properties.
Mortgage REITs: These mortgage REITs offer capital for the owners and managers of real estate directly through loans and mortgages or indirectly through the purchase of securities backed by mortgages. In most straightforward words, they earn profits by recouping the interest from loans they provide to various real estate ventures. The difference in their mortgage interest and the expense of financing these loans (also called the net interest margin) is the main factor that drives their profits.
Hybrid REITs: Hybrid REITs use an amalgamation of the mortgage and equity REIT strategies for investment.
Commercial Real Estate Categories
Commercial real estate and REITs, in general, are also classified under several subcategories.
Here are a few of the most important commercial real estate types:
- Retail: REITs focus on the management and ownership of retail properties, especially in areas of business and shopping districts. (Think of retail stores or shopping centers).
- Multi-family: REITs hold and manage rentals for residential properties. (Think of apartment buildings, houses designed for families to live in).
- Healthcare: REITs focus on managing and owning healthcare-related facilities, including hospitals and surgical centers.
- Office: REITs which hold and manage office spaces.
How Do Real Estate Investment Trusts Make Money?
Real Estate Investment Trusts (REITs) buy properties to earn rent from the tenants of the building. Individual investors can purchase shares or a portion of REITs. This allows investors to make money by investing in various properties and real estate-related securities in one portfolio. The dividends paid by the REIT result from the profit they earn from the rental income they earn through their real estate business.
What to Expect From a REITs Career Path?
Here are some expectations to consider when considering a career in the REIT route.
- Different REIT types have different investment goals. For instance, equity REITs could significantly differentiate from mortgage REITs concerning their investment goals. This can affect the knowledge you’ll acquire to operate these REITs.
- REITs have a very high obstacle to admission when starting in the area. Finding the knowledge and contacts necessary to start your career in this area can be challenging.
- The people in this profession must also be able to identify with the real estate market and should consider specializing in specific types of real estate or a specific job in the management of the real estate process.
Different Jobs in Real Estate Investment Trusts
A REIT team can have various roles in buying and managing real estate and other investments. The roles vary from development and construction to property management and financial analysis.
Below are some of the most common roles within a REIT:
Property Manager
Estimated Annual Salary: $35k – $90k
Certain REITs will have property managers in-house, while others contract out property management to an external company. Property managers are in contact with tenants and manage all day-to-day tasks required to keep the property in good condition.
Asset Manager
Estimated Annual Salary: $50k – $128k
Asset managers are responsible for making the most important decision-making regarding property management. Asset managers require an understanding of finances because they are constantly evaluating and controlling a property’s operating expenses concerning the revenue-generating capacity of the property.
Acquisition Analyst
Estimated Annual Salary: $50k – $119k
An acquisition analyst is accountable for finding profitable opportunities to purchase real estate. Analysts must thoroughly understand current market conditions and have solid mathematical modeling skills. Analysts may also negotiate prices and other real estate transaction-related details.
Marketing Coordinator
Estimated Annual Salary: $37k – $97k
An experienced real estate sales coordinator is accountable for the development and execution of marketing campaigns that aid the company in advertising new properties. This is especially important to attract quality potential buyers or tenants.
Construction and Development Manager
Estimated Annual Salary: $50k – $140k
Development and construction managers are responsible for the REIT requirements to build or remodel an existing property. Property development is complicated and risky but typically linked to better financial yields.
Required Skills for a Career in REITs
There are a few fundamental skills you must be able to master before launching the REIT industry. The significance of these skills will differ based on the job. However, it’s important to understand the following skills overall.
- Understanding models and financial statements
- The real estate market and trends in the market
- Experience with the due diligence process for real estate
- Negotiation and building relationships
Advantages and Disadvantages of Working For a REIT
Advantages of Working For a REIT
- High-Income Opportunity: Certain roles in the REIT system and commercial real estate are mostly tied to company performance. In this way, highly performing REITs with billions or millions of dollars can reward employees with lucrative payments.
- Quantitative The focus: Those who enjoy working with data and figures will successfully conduct data-driven market analysis. This kind of skill can lead to jobs that lead to higher-level managerial positions.
- Tangible Assets Real estate is a tangible property; it’s something you can see, touch, or feel. This allows those unfamiliar with the real estate industry to be compared to other sectors built on intangible and complex revenue streams.
Disadvantages of Working For a REIT
- Travel requirements: Some roles in commercial real estate demand quite a few trips. It can be a pleasure for some. However, some may find it exhausting and tiring.
- Lang Deal Cycles Real estate deals for commercial use can be complex and may take months or more to finish. You could be stuck with the same property for a prolonged time based on your role.
- Market Fluctuations Present market trends heavily influence the real estate market. Economic weakness can result in low-performing businesses with lower employee compensation.
Final Conclusion: Is real estate investment trusts a good career path?
Real Estate Investment Trusts can be a fantastic career option for those pursuing finance and real estate careers. If you have the right attitude and commitment, people can develop the financial and interpersonal skills required to succeed in this field.
Accounting and finance knowledge can be an asset to beginners and managers seeking to get into the field. I hope you understand that is real estate investment trusts a good career path for you or not!