Want to know How Many Jobs Are Available in Real Estate Investment Trusts? Well, read this article to know more.
Real estate investment trusts, or REITs, are companies that own, operate, or finance income-producing properties.
They offer investors a way to participate in the real estate market without having to buy or manage any properties themselves.
REITs can also provide steady income, diversification, and tax benefits to their shareholders.
But how many jobs are available in this industry, and what are the qualifications and skills required to work in it?
In this article, we will explore these questions and more.
How Many Jobs Are Available in REITs?
According to the National Association of Real Estate Investment Trusts (Nareit), there were approximately 326,000 full-time jobs directly related to REITs in the U.S. in 2019.
These jobs include property managers, leasing agents, maintenance workers, security guards, accountants, lawyers, analysts, and executives.
In addition, REITs supported another 3.4 million full-time jobs indirectly through their spending on construction, renovation, operations, and other activities.
These jobs include contractors, architects, engineers, electricians, plumbers, landscapers, cleaners, and other service providers.
The total economic contribution of REITs to the U.S. economy was estimated at $153.1 billion in 2019.
What Types of REITs Are There?
There are many types of REITs that specialize in different sectors of the real estate market.
Some of the most common ones are:
- Equity REITs: These REITs own and operate various types of properties, such as office buildings, shopping malls, apartments, hotels, warehouses, and data centers. They generate income mainly from rents and capital gains from property sales.
- Mortgage REITs: These REITs lend money to real estate owners or invest in mortgages or mortgage-backed securities. They generate income mainly from interest payments and fees.
- Hybrid REITs: These REITs combine the characteristics of both equity and mortgage REITs. They own and operate properties as well as provide financing to real estate owners or investors.
- Publicly traded REITs: These REITs are registered with the Securities and Exchange Commission (SEC) and trade on major stock exchanges like the New York Stock Exchange (NYSE) or the Nasdaq. They are subject to disclosure and reporting requirements and offer high liquidity to investors.
- Non-traded REITs: These REITs are also registered with the SEC but do not trade on any stock exchange. They are typically sold through brokers or financial advisors and offer less liquidity and transparency to investors.
What Are the Benefits and Risks of Investing in REITs?
Investing in REITs can offer several benefits to investors, such as:
- High dividend yield: REITs are required by law to distribute at least 90% of their taxable income to shareholders as dividends. This makes them attractive for income-seeking investors who want a regular cash flow from their investments.
- Diversification: REITs can help diversify a portfolio by providing exposure to a different asset class that may have a low correlation with other investments. This can reduce the overall risk and volatility of the portfolio.
- Tax advantages: REIT dividends are generally taxed at a lower rate than ordinary income for individual investors who meet certain criteria. Also, REITs do not pay corporate income tax as long as they meet certain requirements.
- Professional management: REITs are managed by experienced professionals who have the expertise and resources to acquire, operate, and maintain quality properties. This can save investors the hassle and cost of dealing with real estate issues themselves.
However, investing in REITs also involves some risks, such as:
- Interest rate risk: REITs are sensitive to changes in interest rates, which can affect their borrowing costs and profitability. Higher interest rates can also make bonds and other fixed-income investments more attractive relative to REITs, reducing their demand and price.
- Market risk: REITs are subject to fluctuations in the real estate market, which can be affected by various factors such as supply and demand, economic conditions, consumer preferences, competition, regulations, and natural disasters. A downturn in the real estate market can reduce the occupancy rates, rents, and values of REIT properties.
- Liquidity risk: Some types of REITs have lower liquidity than others. For example, non-traded REITs may have limited redemption options and high fees for early withdrawals. Also, some equity REITs may have a large portion of their assets tied up in illiquid properties that are difficult to sell quickly.
- Leverage risk: Some REITs use a high degree of leverage (debt) to finance their operations and acquisitions. This can magnify their returns but also their losses if interest rates rise or property values fall.
How to Invest in REITs?
There are several ways to invest in REITs, depending on your preferences, goals, and risk tolerance.
Some of the most common ones are:
- Buying individual REIT stocks: You can buy shares of publicly traded REITs through a broker or an online trading platform. This gives you the flexibility to choose the REITs that match your criteria and objectives. However, this also requires you to do your own research and analysis, monitor the performance and financial health of the REITs, and pay commissions and fees for each transaction.
- Buying REIT mutual funds or exchange-traded funds (ETFs): You can buy shares of funds that invest in a basket of REITs or track a REIT index. This gives you the benefit of diversification, professional management, and lower transaction costs. However, this also means you have less control over the selection of the REITs and pay management fees and expenses for the fund.
- Buying non-traded REITs: You can buy shares of non-traded REITs through brokers or financial advisors who are authorized to sell them. This may give you access to some niche or specialized sectors of the real estate market that are not available in the public market. However, this also means you have less liquidity, transparency, and regulatory protection, and pay higher fees and commissions for the investment.
How to Choose the Right REITs for Your Portfolio?
Choosing the right REITs for your portfolio depends on several factors, such as:
- Your investment objectives: You should consider your investment goals, time horizon, risk tolerance, and income needs before investing in REITs. For example, if you are looking for long-term growth, you may prefer equity REITs that invest in high-quality properties with strong growth potential. If you are looking for income, you may prefer mortgage REITs that pay high dividends from interest income.
- The performance and valuation of the REITs: You should evaluate the past and expected performance of the REITs based on various metrics, such as earnings per share (EPS), funds from operations (FFO), net asset value (NAV), dividend yield, dividend payout ratio, return on equity (ROE), debt-to-equity ratio, occupancy rate, and price-to-earnings (P/E) ratio. You should also compare these metrics with those of their peers and the industry averages to determine their relative strengths and weaknesses.
- The quality and diversity of the REITs’ properties: You should examine the quality, location, condition, age, and tenant mix of the properties owned or operated by the REITs. You should also consider the diversity of their properties across different sectors, geographies, and markets to assess their exposure to various risks and opportunities.
- The management and governance of the REITs: You should assess the experience, reputation, strategy, vision, and alignment of interests of the management team and board of directors of the REITs. You should also review their corporate governance practices, such as their policies on conflicts of interest, compensation, shareholder rights, disclosure, and accountability.
REITs are a popular way to invest in real estate without having to own or manage any properties yourself.
They can offer several benefits to investors, such as high dividend yield, diversification, tax advantages, and professional management.
However, they also involve some risks, such as interest rate risk, market risk, liquidity risk, and leverage risk.
Therefore, before investing in REITs, you should do your homework and research the different types of REITs available, their performance and valuation metrics, their property portfolios, and their management and governance practices.
You should also consider your investment objectives, risk tolerance, and portfolio allocation to choose the right REITs for your needs.
REITs can be a rewarding investment option for those who want to gain exposure to the real estate market without having to deal with its complexities.
However, they are not a one-size-fits-all solution for every investor.
As with any investment decision, you should weigh the pros and cons carefully and consult a financial advisor if necessary.