A Real Estate Investment Trust is a device that permits you to invest in real estate and property but without the usually hassles associated with purchasing such property on your own. A real estate investment trust is a system where a group of investors collectively gather their funds into a legal trust and invest in various forms of real estate. If you've ever heard of other investment mechanisms such as mutual funds, you'll understand the way real estate investment trusts are supposed to work. A real estate investment trust may also be known as a REIT and a REIT invests in different types of property.
One form of Real Estate Investment Trust is the mortgage REIT, which provides a unique service in that it supplies new home owners with money in order to purchase new property. People may also invest in such devices in order to get loans and securities which are backed by these REIT and mortgages. As with any investment device, a certain form of risk is always involved and methods have been created to effectively handle these types of risk. The risks that are associated with a real estate investment trust will vary and can be dependent on a varied number of factors some of which include the location the investments are based in and other factors. Real Estate Investment Trust is a company that operates income producing real estate such as apartments, offices, warehouses, shopping centers, and hotels. Though a variety of property types are there, most of the REIT concentrate on any one of the property types only. Those specializing in health care facilities are called the health care REIT's. The real estate investment trust was formed in 1960 in order to make large scale income raising investments in real estate, which can be easily accessed by smaller investors. The trust's main advantage is that it helps a person to select an appropriate share to invest on from a variety of group rather than investing on a single building or management. Unlike the usual REIT's who invest in mortgage loans, equity Real Estate Investment Trust invest directly in the physical property. In the regular investment trusts, they invest in mortgage loans i.e. they provide loans to people who are willing to invest in the property. They will be repaid back the money along with interest, which becomes their profit. They will carefully select the right people who deserve a qualified mortgage loan and invest on them who in turn buy property and pay back the money to the REIT along with interest. But when it comes to investment trusts, they don't invest in the mortgage loans and make money. In turn they invest the money in buying the property themselves and giving it for rent. Most of the time equity investment trusts are viewed as partial substitutes for the conventional property investments. The actual correlation between the equity Real Estate Investment Trust and traditional property returns are insignificant. The primary focus on profits of the equity investment firms is through the acquisition and management of the direct physical property. Whereas for the conventional investment trusts the prime focus of profits is from the interest paid for the mortgage loans. In equity investment trust there is direct ownership on the property, whereas in the conventional REIT there is no ownership existing. Equity Real Estate Investment Trust invest in and at the same time own properties themselves. Their revenues come mainly from the rents of their properties. These trusts are different from the mortgage property investment firms, which provide mortgage loans to the buyers. They don't buy existing mortgages and mortgage backed securities. It buys and owns properties rather than investing in the mortgages. The properties are then given on a rent from where they get the principal amount as revenue. The risk involving in the investment in REIT depends on the type you choose. When it comes to investing in equity real estate investment firms there is a potential for investment returns because of- appreciations in the value of the owned property.
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