What Is A REIT?

Ready to expand your investment portfolio and looking for the right partner? Chances are if you have made it this far, you have come across a REIT. A REIT, or Real Estate Investment Trust, is a company that funds, owns, or operates income-driving real estate. REITs can offer a more secure way for almost anyone to access and benefit from real estate investments with opportunities for increased returns and a strengthened portfolio.

As with any investment, doing your research before diving into it is essential to ensure it is the right fit for you and your goals.

Luxury condos grouped together on a paved brick road with beach access
Luxury homes with beach access

What does a REIT do?

REITs do not develop properties to resell and instead focus on the development and operation of said properties with the intention to hold on to them as a part of an investment portfolio. Or, to break it down even more, the REIT owns the property, generates income through rentals, and divides the profits among everyone. This allows individuals to invest in commercial properties and participate in the profits generated by commercial real estate.

Types of Real Estate Investment Trusts

Equity: These REITs own and operate income-producing real estate.

Mortgage: These REITs, sometimes called mREITS, provide capital to owners and operators through real estate loans, mortgages, or securities. MREITs use more borrowed capital than their counterparts and hedging techniques to manage risks and rates.

Hybrid: Just like it sounds, hybrid REITs use a mix of investment strategies from both equity and mortgage REITs.

These can all then be further sorted into traded and non-traded REITs.

Traded: These REITs are registered with the SEC, listed, and traded as public companies on the national stock exchange. Real-time market values are available for traded REITs. These are the most secure types of REIT.

Non-traded: These REITs are registered through the SEC but are not publicly traded. Market values may not always be transparent but can offer higher dividends. Non-traded REITs must be purchased through a broker or REIT Mutual Fund.

The Pros and Cons of REITs

Pros

  • Accessibility – REITs are not just for Wall Street and the investment elite. REITs make investments in commercial properties accessible for investors of almost any amount. For those looking just to get started, there are low-cost, low-risk opportunities.

Cons

  • Lack of Liquidity – Specifically for non-traded REITs, these shares often take time to sell and aren’t as readily available to be turned into working capital.
  • Conflict of Interest – Some REITs are managed outside of the company by a third party. Because of this, the external manager might not always have shareholders’ interests in mind, which can lead to an increase in fees.

How are we different?

NRE, while in some of the same circles as REITs, does things quite a bit differently.

REITs are more conservative and focus on commercial real estate that will bring consistent returns. NRE tackles projects more aggressively. We focus on the residential sector and thrive in taking chances that have higher, more impactful returns.

Our favorite projects go beyond the cheapened idea of luxury and instead in the niche markets that surpass opulence and expectation—the more opportunities to get creative and increase value (and returns), the better. Instead of relying on outside management, we work as a team, leaning on each others’ experience and specialties to ensure the best return for everyone involved. Each project is a passion project rather than a source of passive income.

Kitchen dining room table left
Kitchen dining room table left

NRE does not sell shares like a REIT does; instead, it brings individuals together in a partnership through our onboarding process. Each project is treated differently, with a bespoke approach crafted to the needs and goals of everyone involved.

Our Process

Where REITs often invest in communities outside of their own, our primary focus is in our own community of Naples, Florida. We are intimately familiar with the ins and outs of the area neighborhoods, and when we invest, we are living every part of it.

The Naples Relocation Experts and Compass Real Estate team standing at a kitchen counter from left to right Andrew Ventura Chanel Josephson and Drew Josephson
The Naples Relocation Experts and Compass Real Estate team standing at a kitchen counter from left to right Andrew Ventura Chanel Josephson and Drew Josephson
  • Step One – Consultation: We all sit down and get to know each other. We find out what the client wants and exactly how involved they want to be.
  • Step Two – Highlight Goals: We use the information we learned during our consultation to set specific, measurable goals.
  • Step Three – Craft a Plan: We take everything we learned from Step One and keep the goals set in Step Two in mind as our end game while crafting a specific step-by-step plan for success.
  • Step Four – Execute: Execute the plan as outlined in Step Three; it’s as easy as that!

If you are looking for your next, or even your first, investment opportunity in Naples, we want to be a part of it. The relationships we build with our clients and peers only add to our strengths. With bespoke strategic partnerships in the realm of real estate investment, realtors, consultants, and investment clients combined create support that can increase R.O.I. For all parties involved.

Resources

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