Yes, REITs is a good career path. If you have an interest in real estate investing but you don’t want to own it yourself and take the high pressure then a career in REITs can be a good choice for you. You will have quite a few options to choose from like become a developer or manage the property. You can also become an asset manager or investor relations officer and have a solid career.
- Real estate is a broad sector therefore it offers many career paths including the real estate agent
- A company will qualify as a REIT if the company invested 75% of total assets in real estate
- REITs are available in three types: Equity REITs, Debt REITs, and Hybrid REITs
- Some popular career options with REITs are Acquisitions, Developer, Property Management, Asset Management, Investor Relations
What Are Real Estate Investment Trusts?
A real estate investment trust (REIT) is a type of investment fund that is formed with many other investors. Usually, a REIT owns and operates income-producing real estate. In a REIT, you can invest in a portion of a real estate project and generate profit. Most REITs are related to commercial properties like hospitals, apartments, shopping malls, etc. The best part of REITs is, you can earn dividends from real estate investments without having to buy, manage, or finance any properties by yourself.
What Qualifies As A REIT?
If a company wants to qualify as a REIT then it must comply with certain provisions in the Internal Revenue Code (IRC). There are some requirements the company has to fulfill like a certain amount of primary income-generating real estate and what percentage of the income is distributed to shareholders. Below are some requirements that a company must meet to qualify as a REIT:
1. Invest at least 75% of total assets in real estate, cash, or U.S. Treasuries
2. Derive at least 75% of gross income from rents, interest on mortgages, or real estate sales
3. Pay a minimum of 90% of taxable income in the form of shareholder dividends each year
4. Be an entity that’s taxable as a corporation
5. Be managed by a board of directors or trustees
6. Have at least 100 shareholders after its first year of existence
7. Have no more than 50% of its shares held by five or fewer individuals
How REITs Work
The working procedure of REITs is different from conventional mutual funds or investment funds. When you invest in REITs, you are actually investing in a liquid asset. This process is different from buying real estate for you. In REITs, you invest in multiple properties and you diversify your portfolio and risk. There are quite a few different types of REITs available. They are –
1. Equity REITs: Here you invest in the purchase and management of income-producing properties. Examples of this type of REIT are apartments and shopping malls. So, basically, you will have the role of a developer without the responsibility of building and managing the property.
2. Debt REITs: You can also invest in mortgage REITs. So, here you will finance the property, or the pooled funds provide the mortgage. You will get profit from the interest of the loan and it will vary depending on the market’s performance.
3. Hybrid REITs: There are hybrid REITs available where you can also invest to diversify your risk. This type of REIT is a combination of an equity and debt REIT. If you invest in this type of REIT then you will get dividends from rental income, capital gains, and mortgage interest.
Career Options With REITs
If you want to build your career in REITs then below are some popular career options for you.
1. Acquisitions: The role of this part of REITs is to find new investment opportunities and complete the deal. This is a highly demanding role with heavy cash flow. Therefore, you will need a strong educational qualification with a background in capital markets, finance, marketing, or general business. As an analyst, you can expect to make around $80,000 in salary
2. Developer: It’s the responsibility of a developer to build a property from the ground up. Developers are the core of a REIT team because if there is no developer then there won’t be any property. Contractors and subcontractors work under a developer and complete the project.
3. Property Management: You can also build your career as a property manager. The responsibility of a property manager is to manage and handle the property. Property managers are solely in charge of the property’s profits and how it operates.
4. Asset Management: This is also a very demanding career path in REITs and it’s the responsibility of an asset manager to control the entire REIT portfolio and answers the investors. The asset manager decides which assets to invest in and monitor the performance of the asset. Finally, they report to the investors.
5. Investor Relations: If you love dealing with people then you can consider growing your career as an investor relations officer. Here, you have to directly deal with investors, answer their various questions and hold weekly monthly, and annual meetings.
Future Of REITs Career Path
If you want to build your career in REITs then you should understand that a career in REITs is a specialized career. If you are keen to make a career in real estate investing then you should definitely consider building your career in REITs. Many people think of the amount of money they can earn from this sector. This is a sector where investors invest a huge amount of money so money should not be a problem in this sector. At least, you can be assured that there won’t be any shortage of money in this sector. In this sector, the earlier you invest money, the more time your earnings have to compound. With time, your investment will turn into a full-blown income stream. You can also pick a role in the REITs team and establish your career in this sector. However, you will need proper qualifications, education, and experience to be added to a profitable team. So, identify the area of REITs that you have more interest in and focus your efforts there.
Entry Points Of REITs Career Path
There are quite a few entry points available to start a career in REITs. You can enter the sector from a variety of sources. They are –
1. Right after completing the graduation
2. Investment banking groups at BBs and EBs
3. Eastdil specializes in real estate
4. Investment sales employment
5. Working in real estate’s brokerage firms
6. Commercial real estate debt funds
7. Commercial real estate lending
8. Role in acquisitions in REITs or REOCs
9. Experience of working as property development
10. Work experience in real estate investment banking
FAQs About Is Real Estate Investment Trusts (REITs) A Good Career Path?
1. Can Real Estate Investing Be A Career?
Yes, real estate investment can be a career. However, making money in this sector might be easy but making a career is not that simple. There are many beginner property investors available, who are facing problems establishing their funds and career. So, think carefully before deciding to start a career in this sector.
2. Can REIT Make You Rich?
There is nothing in the world that can make you guaranteed rich. So, there is no guarantee that REIT would make you reach. However, there are some real estate investments trusts (REITs) available that could make you reach in 2021. They are –
1. Realty Income (NYSE: O)
2. Digital Realty Trust (NYSE: DLR)
3. Vanguard Real Estate ETF (NYSEMKT: VNQ)
3. Are Real Estate Investment Trusts Worth It?
Yes, real estate investment trusts are worth it because REITs are total return investments. Usually, REITs provide high dividends and have the potential for long-term capital appreciation. Moreover, fixed-income investments also make REITs a good portfolio diversifier.
4. Who Is The Richest Real Estate Investor In The USA In 2021?
Irvine Company Chairman Donald Bren is the richest real estate investor in the USA. According to Forbes, he has an estimated net worth of $15.3 billion.
References: 1 https://www.investopedia.com/terms/r/reit.asp
References: 2 https://www.investopedia.com/articles/mortgages-real-estate/10/real-estate-investment-trust-reit.asp
Last Updated on October 18, 2022 by Magalie D.
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.